KFC, Taco Bell Puerto Rico franchisee files bankruptcy

Yum Brands is looking for a new operator in Puerto Rico after its longstanding franchising didn't operate up to its standards. Photo courtesy of Yum Brands

Puerto Rico-based Encanto Restaurants filed for Chapter 11 bankruptcy on Nov. 5, just three days after Yum Brands announced it was ending its longstanding relationship with the operator.

In a statement, Yum Brands said, “Encanto can no longer operate in a way that meets our standards.”

Financials and liabilities

Encanto reported approximately $123.9 million in liabilities against $29.8 million in assets. One major creditor identified is Banco Popular de Puerto Rico. According to El Nuevo Dia, the bank is owed approximately $85 million. Other reported claims include $3 million to advertising provider Arco Publicidad, $3 million to LUMA Energy, and $2.5 million to food and paper supplier Plaza Warehousing & Realty.

The company faced numerous collection and landlord disputes before filing, according to local reports.

Puerto Rico officials estimate that approximately 2,700 employees were affected by last week’s closure of Encanto’s KFC and Taco Bell restaurants in the market. The company also operates Pizza Hut and IHOP locations on the island.

Impact and future plans

Yum Brands said it remains committed to Puerto Rico and is looking for a new franchisee to reopen the impacted restaurants.

KFC debuted in Puerto Rico in 1967. Taco Bell opened there in 1985.

Encanto became the exclusive franchise operator of KFC, Taco Bell, and Pizza Hut restaurants in Puerto Rico in 2004. Pizza Hut was a part of Yum Brands until earlier this year when it was sold in a take-private deal to LongRange Capital.

Encanto notes it is among the 10 largest employers in the private sector in Puerto Rico, with more than 3,000 employees and 180 restaurants. More than 80 of those are KFCs.