By Stuart Condie

SYDNEY--Taco Bell's Australian franchise operator is exiting the business after the Mexican fast-food chain failed to meet its expectations.

Collins Foods, which is also Australia's largest operator of KFC restaurants, on Tuesday said that it aimed to transition its Taco Bell restaurants to new owners within the next 12 months. It said it is in talks with Yum! Brands' Taco Bell International segment about its plans.

"If a new operator cannot be identified and/or an agreement cannot be reached, other exit options will be explored," Collins said.

Collins opened its first Taco Bell restaurant in 2017 and aimed to have up to 50 new stores by the end of 2021. However, Collins quickly ran into problems, including the disruption caused by the Covid-19 pandemic.

In 2022, it wrote down the value of the operation and paused development on multiple sites, with its then CEO acknowledging issues that included product quality. In June 2024, Collins had 27 outlets and said it was focused on brand development rather than expansion.

At the same time, locally founded Guzman Y Gomez has shown Australians have a big appetite for Mexican food. The fast-growing chain listed on the Australian Securities Exchange in 2024 and this month said it expects to beat the annual profit forecast in its prospectus.

Guzman Y Gomez had 211 Australian restaurants as of March 31, generating quarterly sales of 267.6 million Australian dollars, equivalent to about US$169.3 million. Collins' Taco Bell restaurants generated A$24.6 million in revenue over its last fiscal half.

Collins announced the exit as part of a strategic review and said it had entered a binding agreement with Yum! to accelerate the growth of the KFC brand in Germany. Collins has secured exclusive rights to the brand across two regions, accounting for about 35% of the country's 83 million population. It is targeting between 40 and 70 new KFC restaurants in Germany over the next five years.

Collins is also in talks with Yum! over its KFC franchise agreement in the Netherlands. It plans to impair the value of its Netherlands restaurants by between A$25.5 million and A$32.7 million as it looks to review and optimize operations there, Collins said.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

April 14, 2025 20:42 ET (00:42 GMT)

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