Fast food chain operator Collins Foods to dump struggling Taco Bell in Australia

The nation’s biggest KFC operator Collins Foods will dump its Taco Bell chain in Australia as it struggles to compete with key Mexican-themed food rival Guzman Y Gomez.

ASX-listed Collins Foods owns 285 of the 750 KFCs in Australia, as well as 27 Taco Bells, including all four in WA.

Newly appointed Collins Foods chief executive Xavier Simonet on Tuesday said discussions were now under way with Taco Bell International regarding a potential sale of the business to new ownership.

Collins Foods intends to complete the transition withi the next 12 months, subject to formal terms being agreed.

Taco Bell has had a rocky history in Australia, marked by multiple attempts to establish a presence.

The chain first launched in Australia in 1981 but faced a lawsuit from a local restaurant named Taco Bell’s Casa over the name. Taco Bell attempted to launch again in 1997 but failed after eight years. Collins Foods took over in 2017.

In its half-year result in December, Collins Foods blamed a difficult consumer environment for Taco Bell’s flat performance. In the six months to October, revenue fell 2 per cent to $24.6 million.

“If a new operator cannot be identified and/or an agreement cannot be reached, other exit options will be explored,” Collins Foods said on Tuesday.

Collins Foods will now focus on its core KFC operation. As part of Mr Simonet’s strategic review, Collins Foods and KFC parent company YUM Brands have entered into a binding agreement to accelerate strategic growth in Germany, where it has about 207 KFC restaurants.

Collins Foods is targeting between 40 and 70 new locations across the country over the next five years.

It will continue its partnership with YUM in Australia — which Collins Foods considers a key growth market — to deliver top line sales growth through product and service innovation, engaging consumers digitally, enhancing operational execution and focusing on cost management to support ongoing profit growth.

But the fast-food chain operator has also flagged impairments of up to $32.7m on its KFC Netherlands portfolio. Collins Foods said the local quick service restaurant sector faced headwinds from cost-of-living pressures, labour inflation and development constraints, which have impacted its profitability.

Mr Simonet said the new initiatives provided strategic clarity and renewed purpose.

“We remain laser focused on delivering operational excellence in our core market, Australia, where we continue to successfully adapt to a dynamic consumer landscape,” he said.

“We are excited about accelerating expansion into Germany where the market remains under-penetrated, offering a clear runway for growth.

“We will continue to deliver high-quality food at accessible prices, leveraging the heritage of the KFC brand at a time when consumer trust has never been more important.”

Collins Foods shares closed down 7.7 per cent to $8.