With an eye toward international expansion efforts, Yum! Brands Inc. has sold two notable American labels.
The Louisville, Ky., operator of KFC, Taco Bell and Pizza Hut has agreed to sell its A&W All-American Food and Long John Silver’s chains to franchise groups LJS Partners LLC and A Great American Brand LLC, respectively, for undisclosed terms.
One industry banker familiar with Yum!’s strategy estimates that the company got less than $50 million for the two brands combined because they are both assets that need to be restructured.
Yum!, the world’s largest fast-food chain operator by restaurant count with more than 38,000 locations, put A&W and LJS on the auction block in January so it can focus on expanding its three core brands in China. One of its rivals, Wendy’s Co., followed Yum!’s path around the same time when it put Arby’s Restaurant Group Inc. on the block and ultimately sold the chain to Atlanta private equity firm Roark Capital Group for $320 million in July.
“As we continue to sharpen our long-term growth focus on international expansion and improving our U.S. brand positions in KFC, Pizza Hut and Taco Bell, Long John Silver’s and A&W no longer fit our long-term growth strategy,” Yum! chairman and CEO David Novak said in a statement.
China continues to be Yum!’s main growth strategy. In its July earnings release, Yum!’s operating profit for its Chinese business increased by 25%. The chain also opened 99 new restaurants in the second quarter to increase its total count in the region to more than 4,000.
Yum! said earlier this year that its expects 75% of its total profits to come from China by 2015.
Emerging markets such as China, the Middle East and Eastern Europe continue to represent attractive growth opportunities for multibrand restaurant operators because of their growing middle-class populations, untapped real estate markets and increasing reception to U.S.-originated restaurant chains.
Yum! acquired A&W and Long John Silver’s in 2002 from Yorkshire Global Restaurants for $320 million. A&W and LJS have more than 1,600 combined restaurants.
Yum! does not expect the transaction, expected to close by the end of the fourth quarter, to have a material impact on its earnings.
Roger Matthews and Arden Lee of Goldman, Sachs & Co. gave Yum! financial advice. Frederick Thomas, Jodi Simala, Ryan Lawrence, Joseph Hable and Allison Handy of Mayer Brown LLP represented Yum!.
Shares of Yum! were trading 2% higher, to $51.95, with its market capitalization near $24 billion.
A Yum! spokeswoman declined comment.