IMC ends arbitration with Yum, proprietor of KFC

IMC — the owner of Frango Assado and Viena restaurants — has reached an agreement with Yum! Brands, the owner of KFC and Pizza Hut, putting an end to an arbitration that had been going on for nearly two years.

Arbitration began in early 2021, when Yum filed an injunction against IMC asking for the termination of KFC’s master-franchise agreement in Brazil.

The original contract between the two companies provided for a minimum growth obligation for the KFC brand that IMC was unable to deliver, largely because of the pandemic.

Under the terms of the new agreement, IMC will remain as KFC’s master franchisee for the South and Southeast regions of Brazil. The contract, which was due to expire in 2027, was renewed until 2032.

Yum has not yet decided what it will do with the other regions of Brazil, but for IMC, the impact will be small.

Of the 132 stores that KFC has in Brazil, only 14 are outside the South and Southeast.

“It’s a very important deal for IMC’s growth agenda,” CEO Alexandre Santoro told Brazil Journal. “Given the situation, it was the best possible deal for both sides.”

The news should take some weight off the IMC share, as KFC currently represents 20% of the group’s revenue and is one of the brands in the portfolio with the greatest potential for growth.

According to the CEO, the new agreement presupposes the opening of another 400 KFC stores, in the South and Southeast, over the next ten years – an average of 40 stores per year.

IMC will open both its own stores and franchises and one of the focuses will be street stores, with drive thru. Today, the company has 62 KFC stores, more or less half of the total, and most of the restaurants are within malls.

The billing of the entire KFC system (counting owned stores and franchises) is around R$ 650 million — with about half of that going to IMC.

If the agreement was not closed, IMC would continue to operate its own stores, but would stop receiving the royalties franchises and could no longer sub-franchise the brand.

In addition to KFC, IMC intends to focus its expansion on Frango Assado and Pizza Hut. For Frango Assado, Santoro sees the potential to double or triple, in the coming years, the park of 25 stores in São Paulo alone, where the company has mapped more than 1,000 gas stations with the potential to have a food service.

Source: Brazil Journal