Smart Service K & K, the franchisee operating the branches of the international fast-food chain KFC in Israel, has submitted an urgent application to the Beersheba District Court for an order to initiate proceedings, stay proceedings, and appoint a temporary trustee. The company, which at its peak operated 13 branches and currently has 12 active branches across the country (including in Tel Aviv, Petah Tikva, Netanya, Rishon Lezion, Beersheba, Ashdod, and Haifa), has fallen into a severe cash flow crisis.
In the application submitted to the court, it is described that after a period of growth, the company was severely harmed following the events of October 7, 2023, and the Swords of Iron War, alongside additional rounds of fighting that brought about a sharp drop in revenues, a shortage of customers, and a significant burden on operational costs. Despite efficiency attempts and a substantial injection of funds by the shareholders – which totaled about NIS 37 million as owner loans – the company failed to meet its ongoing obligations.
As of the submission of the application, the company's total liabilities stand at about NIS 50 million, which includes, among other things, about NIS 37 million in debt to shareholders, about NIS 9.5 million in unsecured debts, about NIS 1.9 million in debts to employees, and about NIS 1.2 million in debts to authorities and institutions. In addition, the chain recently received warnings and notices of cancellation of lease agreements from property lessors in several locations, alongside a warning letter from former employees.
KFC Israel seeks court protection amid NIS 50 million debt
As part of the application to the court, the company seeks to prevent its collapse and operate its business as a "going concern" under the supervision of a temporary trustee, in order to preserve the chain's assets and examine a plan for economic recovery and rehabilitation.
The crisis experienced by the chain was published on Walla last month. The chain returned to Israel in 2020 under a new franchise after several unsuccessful entry attempts in the 1980s and 1990s. Last year, eight branches were closed, including in Zichron Ya'akov, Tzemach Beach, Nof Hagalil, Beersheba, Ramle, Kfar Saba, and Yarka, which increased concerns regarding the future of operations.
A source close to the chain told "Walla Food" that the chain is in difficulty and various options are currently being examined, including further reduction of activities in Israel.