TRICON TO ACQUIRE LONG JOHN SILVER'S AND A&W

Owner of KFC, Taco Bell and Pizza Hut Expands

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CHICAGO (AdAge.com) -- Tricon Global Restaurants, parent company of KFC, Taco Bell and Pizza Hut, is buying the parent company of Long John Silver's seafood restaurants and the A&W root beer chain for $320 million.

Tricon, headquartered in Louisville, Ky., today announced its plans to acquire Yorkshire Global Restaurants and change its own name to Yum Brands, pending shareholder approval. "YUM" is Tricon's current stock symbol.

The $22 billion Tricon, which already has 1,500 multibranded stores between its own KFC, Taco Bell and Pizza Hut chains, has over the past two years paired 83 KFC units with A&W, six KFC's with Long John Silver's and three Taco Bells with the seafood restaurant through a master licensing agreement.

Multiple brand restaurants
The move will expand Tricon's efforts to combine two or more brands under one roof and increase sales and unit growth here and overseas, the company said.

Yorkshire CEO Sid Feltenstein in January told Adage.com he was considering an initial public offering, but when he considered expanding his company's licensing agreement with Tricon,

he agreed to merge with Tricon.

"Do you sell through an IPO or do you sell to one of the largest companies in the business?" he said. "One way or another we were getting sold."

It is likely the anemic economy was a factor. "It's really, really tough to get an IPO going in the restaurant business in this kind of environement," said Bob Goldin, exec VP with restaurant consultant Technomic.

Mr. Feltenstein and much of Yorkshire's current management will continue in their same roles, although both companies said they weren't prepared to outline specific integration plans for back-office and research functions likely to be consolidated with those at Tricon.

320 Yorkshire employees
Yorkshire has

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roughly 310 to 320 employees. They also said they plan to continue their current agency relationships and expect advertising budgets to increase as sales increase.

Meanwhile this afternoon, struggling Pizza Hut named Wieden & Kennedy, Portland, Ore., as its second roster agency for projects. The review has led to speculation the company may eventually replace its longtime agency, Omnicom Group's BBDO Worldwide, New York. Long John Silver's agency is Publicis Groupe's Fallon, Minneapolis, while A&W works with Creative Alliance, Louisville, which also is a Tricon roster shop. Tricon spent $328 million in 2001, according to the company's annual Securities and Exchange Commission filing released Monday.

Unlike Pizza Hut's recent troubles, KFC and Taco Bell have flourished under new management and new advertising campaigns. With its base business in "great shape," Tricon CEO David Novak said the expansion will allow Tricon to drive global expansion and accelerate average unit sales volumes.

Still dwarfed by McDonald's
Mr. Novak also believes there is room for domestic unit growth despite the mature marketplace. "We are not capacity constrained," he said. With around 5,000 KFC and Taco Bell units, Tricon is dwarfed by McDonald's, which has 12,000 units, and Burger King, which has 8,000 units. Tricon hopes to bring its distribution levels for the two brands closer to that of Burger King.

Also driving Tricon's multibranding effort is the growth McDonald's and Wendy's have seen by offering a variety of food types, from beef to yogurt, which drives volume by customer appeal, Mr. Novak said. By comparison, each Tricon brand has been limited to one, such as pizza or chicken, which has contributed to past failures. This week, Taco Bell broke a limited-time offer for a club-sandwich style Chalupa.

Tricon also has expanded its own brands with a spicy chicken wing test offshoot of KFC called WingWorks and a burger restaurant called Backyard Burgers. To further enhance its variety options, the company is eyeing another possible purchase of a small pasta and sandwich or premium burger chain to pair with Pizza Hut. Both categories have a slew of potential targets.

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