photo of KFC sign by BMM

KFC tried to rid itself of a 28-unit California and Minnesota franchise. Now it has its wish but not the way it wants.  Its bankrupt franchisee, Wagstaff Management, has been acquired not by one of its own but by competitor AFC Enterprises. The franchisor will re-open after rennovating the KFC quick service restaurants as Popeye's Louisiana Kitchen. That helps push KFC out from those communities and Popeye's in.

Reporter Jonathan Maze of  Restaurant Finance Monitor reports that it was lender GE Capital that turned on franchisor KFC Corporation.

Yet the dispute wasn’t so much between Popeyes and KFC as it was between KFC and GE Capital. GE was the secured lender for Wagstaff, and was owed $45 million. The company testified in court on Wednesday that it will likely take a bath on the Wagstaff debt to the tune of $25 million.

Yet GE strongly backed the sale of the restaurants to Popeyes for $13.8 million, even though an existing KFC franchisee with restaurants in Minnesota, LT Investments, owned by Todd Stewart, had a bid worth $16.5 million that Wednesday was increased to more than $17.35 million. The reason: deal certainty.

...When asked on the witness stand why there was so much animosity between GE and KFC (Corporation), David Burger, senior vice president at GE Capital, blamed past experience. “We’ve had experience with KFC in which we’ve negotiated terms with them, and they weren’t followed,” he said.

Kentucky-based KFC has been in a legal dispute with Wagstaff for years and has fought in court for its right to terminate Wagstaff’s restaurants or have them shut down, a fight KFC ultimately won. The franchisee had been trying to sell the restaurants by the end of October to meet a deadline set by KFC. GE was afraid that KFC would back out of its financing commitment after the court approved the deal and then force the restaurants to close.