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Tue, Feb 06, 2001 EST
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Taco Bell Tries to Alleviated Financial Squeeze
By Richard Gibson   Associated Press
DES MOINES, Iowa — PepsiCo Inc., responding to a call for financial help from one of its biggest customers, has sent out "soda rebate" checks six months early to Taco Bell franchisees across the United States.

The accelerated payments — which are believed to total millions of dollars — are among multi-pronged efforts by Tricon Global Restaurants Inc. to alleviate a financial squeeze on franchisees suffering from a sales slump and a recent taco shell recall.

As to the extent of the financial problems in the Taco Bell system, Tricon spokesman Jonathan Blum said, "it is our understanding that the vast majority of the franchisees are cash flow positive and are making their (royalty) payments."

A Dec. 20 memorandum from PepsiCo President and Chief Executive-designate Steve S. Reinemund, addressed to franchisees of the Mexican fast-food chain, said he had been made aware of "your difficult business environment."

Reinemund said he subsequently talked with Tricon CEO David Novak about "the challenges that this environment creates against the day-to-day business, as well as the impact to your longer-term success."

"David has asked me to consider a specific proposal to help address your short-term financial pressures: to offer annual beverage funds normally paid in July 2001 in advance, specifically, in early January 2001," the memo continued.

It said PepsiCo would "like to help resolve the near-term challenges that you face. ... Rest assured, we will expedite this funding as quickly as possible, but certainly by Jan. 15."

A PepsiCo spokesman had no immediate comment on the memo, a copy of which was obtained by Dow Jones Newswires.

One large Taco Bell franchisee confirmed Tuesday that he had recently received his rebate check.

Blum of Tricon said Novak had approached PepsiCo because "it is a strong business partner. They agreed to accelerate payments for Taco Bell because of the cash flow needs of some of the franchisees."

PepsiCo spun off Taco Bell and its two siblings, Pizza Hut and KFC, as Tricon in October 1997.

In recent months Tricon has reported double-digit declines in same-store sales at Taco Bell, with drops ranging from 11 percent to 13 percent compared with a year earlier. Last year Tricon replaced the chain's top management.

There are about 4,000 franchised Taco Bell stores across the United States. Nearly all dispense only Pepsi-made beverages.

In addition to the beverage rebates, Tricon set up a $15 million loan pool — it calls it a "winter relief fund" — to assist Taco Bell franchisees strapped by what Blum said were severe weather issues and the recall of taco shells containing StarLink, a genetically modified corn not approved for human consumption.

Blum didn't say how many franchisees had received that loan money.

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