Business & Finance

Yum Brands Severs Puerto Rico Franchise Deal, Temporarily Closes KFC and Taco Bell Restaurants

By Alicia Kelso

Yum Brands has ended its relationship with local franchise operator Encanto Restaurants, resulting in the temporary closure of all KFC and Taco Bell locations in Puerto Rico. In a statement shared with Nation’s Restaurant News, Yum said Encanto can no longer operate in a way that meets its standards. The company added that it remains deeply committed to Puerto Rico and is working quickly to welcome customers back. KFC Puerto Rico posted on Instagram that the brand has been part of the community for decades and is working to find a new franchise partner to reopen its restaurants. KFC first opened in Puerto Rico in 1967, while Taco Bell began operations in 1985. Encanto became the exclusive franchise operator for KFC, Taco Bell, and Pizza Hut in Puerto Rico in 2004. Pizza Hut was sold earlier this year to LongRange Capital in a take‑private deal, and Encanto also operates IHOP restaurants on the island. Encanto is among the 10 largest private‑sector employers in Puerto Rico, with more than 3,000 employees and 180 restaurants, including over 80 KFCs. The announcement follows a report by El Nuevo Día that one in three Puerto Rican restaurants is considering closing, citing a study by the Puerto Rico Restaurant Association. The study found that 51% of operators cite rising electricity costs as their biggest pain point, and that increasing costs, declining traffic, and shrinking margins are squeezing businesses. Over 95% of operators said their operating costs are higher this year than in 2025, with 17% operating at a loss.