Yum Brands, the multinational parent company of KFC, has declared its plans to acquire 218 KFC outlets from EG Group, the largest franchisee of KFC in the United Kingdom and Ireland. The deal is projected to conclude by the end of the first half of 2024, and upon completion, all of EG Group's KFC businesses in these regions will be directly managed by Yum's KFC UK and Ireland division. The financial terms of the acquisition have been kept under wraps.
Yum Brands' Strategic Move
This acquisition is Yum Brands' strategic initiative to fortify its direct management of the KFC brand in pivotal markets. The takeover is a noteworthy event in the fast-food industry, considering it involves a major franchisor usurping a large number of outlets from its franchisee, which could potentially influence the market dynamics and franchise operations in the UK and Ireland.
Growth Strategy and Market Expansion
KFC, which made its debut in the UK market in 1965, has been experiencing robust sales growth and plans to inaugurate an additional 500 units by 2030. The acquisition is intended to catalyze higher unit volumes and market share growth by enforcing a digital strategy. More than half of the acquired stores are drive-thrus, and the transaction also includes about 7,800 employees. The acquisition will add these restaurants to KFC's equity portfolio, and is expected to have an immaterial influence on the company’s 2024 financial results.
EG Group's Deleveraging Strategy
In addition to KFC, EG Group operates franchise sites for Starbucks, Greggs, and Subway. The sale of its KFC outlets, which is expected to be concluded by the summer of 2024, will aid EG Group in offsetting some of its loans, as part of its significant deleveraging strategy. The proceeds from the transaction will be utilized to repay the debt, ensuring a sustainable capital structure. Despite this sale, EG Group continues its operations in the US, Australia, Germany, France, Italy, the Netherlands, Luxembourg, Belgium, and the UK.