Yum Restaurants Reorganizes Its Business With A Newly Formed Entity Known As Sapphire Foods

Yum Restaurants India Pvt. Ltd, the local branch of American fast-food firm Yum Brands Inc., has “concluded a year-and-a-half-long exercise to reorganize its business under larger, well-capitalized franchisees,” according to reports. The US based Yum Brands operates over 800 restaurants in India with Pizza Hut and KFC brands across the country, and seven Taco Bell joints as well. In recent news, more than 300 outlets have been sold to a newly formed entity known as Sapphire Foods India Pvt. Ltd. The new company is owned by four PE firms and will be managing more than 300 outlets of Pizza Hut and KFC in the country. Samara Capital leads the entity with other investors like CX Partners, Goldman Sachs Group Inc. and a fourth fund, which is said to be a top executive at the local arm of the American food company.

Together, the collaboration has brought our a Rs.750 crore funding, where the group is set to acquire six to seven franchisees, including those held by Mumbai-based Dodsal Hospitality Pvt. Ltd, making Sapphire one of the largest owners of Pizza Hut franchisees in India. Yum Brands’s India business is now split over managing over 800 restaurants across KFC and Pizza Hut brands with three units: Gurgaon-based R.J. Corp. with close to 300 restaurants, about 100-150 restaurants directly with Yum Restaurants, and over 300 with the new entity, Sapphire Foods. “This is a landmark deal, the first of its kind in the category, that sets up our brands extremely well to leverage the huge opportunity that India has to offer and, in the process, create significant value for all stakeholders,” said Ankush Tuli, CFO at Yum Restaurants. The firm, according to Tuli, has plans to double the number of restaurants it operates in India and raise it to almost 2,000 in the next five to seven years. “Business will not grow on the back of multiple smaller franchisees.”

“Yum was looking to reorganize its Indian business by reducing the number of franchisee partners and bringing in investors with deep pockets to help expand presence in an increasingly competitive market,” said a person aware of the development, adding that “the simplified structure post the transaction will help Yum grow the business more efficiently. “The Sapphire Foods investment will make 2015 the best year for PE investments in the restaurant space in the last 10 years. So far this year, $121.5 million (across 17 deals) has been invested in the sector,” according to the financial research platform of VCCircle.com.