Landwer and Poultry Suppliers Eye KFC Israel Following 50 Million NIS Debt
KFC Israel seeks buyers for its 12 branches and enters insolvency proceedings with 50 million NIS in debt, citing wartime impacts and sanctions on Russian funding.
KFC Israel Enters Creditors' Protection Amid 50 Million NIS Debt
KFC's franchise operations in Israel have entered a court-ordered stay of proceedings after accumulating debts totaling 50 million NIS, sparking intense industry interest over potential buyers for its 12 active mall branches. The Landwer group has emerged as a prominent interested party considering the acquisition of the struggling fried chicken chain. Another potential buyer is a poultry supplier examining a takeover to secure supply contracts and create operational synergies, alongside several other restaurant and hospitality entities.
The swift downturn of the franchise has baffled market observers, particularly given that its Russian parent company, Smart Service, previously injected 37 million NIS in owners' loans. Court filings indicate that the foreign shareholders became unable to continue funding operations due to international sanctions on Russian institutions, which blocked capital transfers to Israel. At the same time, industry analysts point to compounding local pressures, including a sharp decline in profitability following the outbreak of the war, a severe drop in tourism and consumer traffic, and strict corporate restrictions from the American parent brand prohibiting advertising campaigns during wartime.
Financial Decline and Mounting Operating Costs
Financial disclosures submitted to the court outline the rapid escalation of the chain's operational burdens. In 2022, revenues reached 30 million NIS against cost of revenues totaling 25 million NIS, concluding the year with a net loss of 2.5 million NIS. Revenues rose to 63 million NIS in 2023, while cost of revenues surged to 49 million NIS, narrowing the net loss to 1.7 million NIS partly due to a 650,000 NIS state wartime grant. By the end of 2024, revenues climbed to 71 million NIS, but soaring expenses pushed the annual net loss to 9.4 million NIS.
The primary cost drivers included massive procurement expenses and heavy mall rental commitments. In 2024, cost of revenues exceeded 60 million NIS, driven by 25 million NIS in inventory purchases and a jump in mall rental fees to 22 million NIS following aggressive branch expansions. Payroll expenses reached 9 million NIS, depreciation totaled 3 million NIS, and financing expenses stood at 2.8 million NIS.
Breakdown of Liabilities and Future Outlook
The chain's outstanding liabilities encompass 3 million NIS owed to Cal, 3 million NIS to global KFC operations—which had previously waived certain royalties—1.9 million NIS in unpaid wages to employees, 1.9 million NIS to suppliers, 1.6 million NIS to property lessors, and 1.2 million NIS to tax authorities and municipalities. Having defaulted on rental payments for September and October, the company received formal lease termination notices and eviction warnings from multiple commercial centers.
Despite previous efforts to pivot toward kosher dining models and restructure operations to capture a wider audience, the combination of wartime economic slowdown and frozen capital transfers ultimately precipitated the current insolvency. Prospective buyers now weigh the remaining physical assets and brand equity as the legal process moves forward to determine the future of the international franchise in the Israeli market.
