KFC Israel Franchisee Files for Bankruptcy Protection Amid Financial Crisis

The Israeli franchisee of the international fast-food chain KFC, Smart Service Q&Q Ltd., has filed an urgent request with the Beersheba District Court for a court order to commence proceedings, stay actions, and appoint a temporary trustee. The company, which at its peak operated 13 branches and currently has 12 active locations across Israel, including in Tel Aviv, Petah Tikva, Netanya, Rishon LeZion, Beersheba, Ashdod, and Haifa, is facing a severe cash flow crisis.

According to the court filing, after a period of growth, the company was severely impacted by the events of October 7, 2023, and the subsequent Swords of Iron War, along with other rounds of conflict. These events led to a sharp decline in revenue, a shortage of customers, and a significant increase in operational burdens. Despite efforts to streamline operations and substantial capital injections from shareholders, totaling approximately NIS 37 million in owner loans, the company has been unable to meet its ongoing obligations.

As of the filing, the company's total liabilities amount to approximately NIS 50 million. This includes about NIS 37 million owed to shareholders, NIS 9.5 million in ordinary debts, NIS 1.9 million to employees, and NIS 1.2 million to authorities and institutions. Additionally, the chain has recently received notices of lease cancellations from property lessors at several locations, as well as a warning letter from former employees.

The company is seeking court intervention to prevent its collapse and to continue operating as a "going concern" under the supervision of a temporary trustee. This aims to preserve the chain's assets and explore a recovery and rehabilitation plan. The crisis affecting the chain was reported last month. KFC returned to Israel in 2020 under a new franchise after several unsuccessful attempts in the 1980s and 1990s. Last year, eight branches closed, raising concerns about the future of its operations.