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Michael writes on emerging markets, architecture and engineering. He has served as a correspondent in Tokyo, London and Johannesburg and has written for Reuters, the Financial Times, The Age and The Sydney Morning Herald.

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Jack Cowin closer to resolving fight with Yum over KFC

Published 16 April 2013 12:19, Updated 17 April 2013 07:06

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Jack Cowin closer to resolving fight with Yum over KFC

Competitive Foods is now in talks to sell its KFC outlets in Western Australia and Northern Territory. Photo: Glenn Campbell

Sometimes a dispute goes on so long it’s hard to remember what the origin was. For Australian fast-food mogul and BRW Rich lister Jack Cowin, however, his long-standing fight with KFC brand owner Yum! International may be - mercifully - coming to an end.

Cowin’s Competitive Foods decided in June last year to sell its troubled KFC division. It is now in talks to sell the 45 KFC restaurants it owns in Western Australia and Northern Territory. Yum! Restaurants International’s regional head of legal and corporate affairs Sally Glover confirmed the negotiations, first reported by The Australian Financial Review.

“Yum has been involved in confidential commercial dealings in relation to a possible transaction but is unable to comment on the detail of those dealings including the identification of the buyer,” Glover said on Tuesday.

While this is no doubt a welcome development for Cowin’s company, it has already overshot the deadline it set itself last year.

“The company is actively seeking a buyer for the business and expects to complete the sale by 1st March 2013,” Competitive Foods says in its latest annual report, filed with the corporate regulator in November 2012.

Cowin did not respond to a request for comment.

Net profit at the KFC division, over which Competitive Foods and brand owner Yum have fought for years, more than halved last year to $2.9 million from $6.2 million in 2011, as total income fell almost 5 per cent. The division has assets worth $17.4 million and liabilities worth $6.3 million.

Competitive Foods’ decision to sell the KFC division came after the two sides agreed to negotiate a resolution in March last year in a bid to avert a scheduled Federal Court showdown. Cowin’s company took Yum to court to prevent the 15 KFC outlets in WA closing at the expiry of their lease that month. The court stayed the expiry of the licences and the two sides entered into confidential discussions.

Yum gave Competitive Foods notice eight years ago that it would not agree to standard 20-year leases on their KFC restaurants. US-based Yum regarded Cowin – with a fortune of $610 million that made him Australia’s 63rd richest person last year – as conflicted in his ownership of a KFC franchise because of a separate investment he had made in pizza chain Domino’s.

Cowin has challenged Yum’s behaviour and relations between the sides have sunk lower than the bottom of a deep-fat fryer.

In 2009 Cowin complained to the Treasury’s Unconscionable Conduct Issues Paper about Yum’s “inappropriate” behaviour over its KFC outlet in Rockingham, WA. The franchise opened in 1977 and had its 20-year lease renewed for 10 years in 1997 but in 2007, Yum! refused to renew the licence further.

Yum then “made an offer to buy (Competitive Foods’) entire KFC network in Western Australia for an amount representing a discount of approximately 40 per cent of its true value on a going concern basis,” Cowin wrote in his submission.

Competitive Foods refused to sell the network, even after Yum raised the price. The Rockingham franchisee was unable to sell the restaurant as Yum would not guarantee tenure of franchise to any purchaser and the store closed in November 2007, he said. KFC opened its own franchise in the area in 2009, Cowin said.

Glover did not say whether a sale by Competitive Foods of its WA and NT KFC outlets would end the formal relationship between the two companies.

“This is a matter of confidential commercial detail that we are unable to comment on at this time,” she said.

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