US fast food giant Yum! Brands is to spin off its troubled Chinese operation into a separate business.
The new company will be called Yum China.
The move will strengthen the parent company which will retain 41,000 restaurants trading under the KFC, Pizza Hut and Taco Bell brands in 125 countries – and which will no loger be saddled with the ongoing losses from the Chinese operations. Nearly all of its restaurants will be operated by franchisees.
“Following the separation, each standalone company will be able to intensify focus on its distinct commercial priorities, allocate its own resources to meet the needs of its business, and pursue distinct capital structures and capital allocation strategies,” said Yum CEO, Greg Creed in a statement.
“This will provide a clear investment thesis and visibility to attract a long-term investor base suited to each business.”
The likely interpretation of that statement is that Yum China will seek local investors or possibly a joint venture partner to help bring the business back on track.
Yum China has 6900 KFC and Pizza Hut restaurants, but has struggled for more than two years after high profile food safety scares involving suppliers.
Mid last year, a Chinese TV network screened footage of a supplier mixing allegedly expired meat with fresh meat. The company, a subsidiary of OSI Group, was a minor supplier to Yum! and its contract was cancelled immediately. But the TV news footage was sufficient to spook Chinese customers, many of whom stopped eating at KFC China outlets.