Yum! Brands, Inc. (NYSE:YUM) shares remained relatively flat in premarket trading on Wednesday following the company's announcement that it has terminated its franchise agreements with IS Gida A.S., the franchisee responsible for operating KFC and Pizza Hut restaurants in Turkey.
IS Gida, a subsidiary of IS Holding A.S., failed to meet Yum! Brands' operational standards, leading to the termination of 283 KFC and 254 Pizza Hut locations in Turkey.
Yum! Brands emphasized its commitment to high-quality customer experiences and stated that it had engaged with IS Gida for several months in an attempt to resolve key issues before reaching this decision.
The closure of these restaurants is expected to be temporary, as Yum! Brands is working to reopen as many as possible in the future.
The company also confirmed that it is taking legal action related to the terminated agreements.
Despite the impact of the closures, Yum! Brands assured investors that the loss of royalties from these locations would not significantly affect its core operating profit in 2025 and beyond.
In a separate development, Yum! Brands successfully reacquired the master franchise rights for KFC and Pizza Hut in Germany in December 2024, taking back control of the market after IS Gida had held those rights for the previous two years.
The company expects to incur a pre-tax special charge of approximately $60 million in the fourth quarter of 2024 due to costs related to both the German acquisition and the termination of the Turkey franchise agreements.
Price Action: YUM is up 0.68% at $129.43 premarket at last check Wednesday.
