In the wake of last week’s (31 January) news that Tricon Global Restaurants had negotiated early “soda rebates” from PepsiCo in a bid to alleviate financial grief amid its Taco Bell franchisees, comes more evidence of the struggling fastfood chain.

Many franchisees had borrowed large sums to finance their control of a Taco Bell restaurant, only to find themselves unable to meet loan repayments. Tricon has now stepped in to negotiate ways of helping struggling operators with bankers and Bay View Capital Corp.  

“Delinquencies have been on the rise,” confirmed Bay View Controller Jeffrey Butcher. He added that these were a direct result of slower sales at Taco Bell. The company’s latest results revealed the forth consecutive period where sales had fallen by double figures on the year earlier.

The problems at the 6,800 store strong chain have been known for months. Last year, senior management was overhauled and two major franchisees in California and Louisiana were forced to file for Chapter 11 bankruptcy court protection after cash-flow problems threatened the repayment of creditors.

The most obvious answer appears for Tricon to repurchase some of the outlets and restructure the debt. The parent company has also established a “winter relief fund” totalling US$15m in order to assist the worst hit franchisees.

At Tricon, senior vice president Jonathan Blum commented: “Our goal is to insure the short-term and long-term success of our franchisees, so we are looking at a number of options which are longer-term for those in need of financial assistance. It would be premature to comment on what those are.”

To read our earlier coverage of Taco Bell and the “soda rebates” from PepsiCo, click here.