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
"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
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