A KFC outletBRIAN BOHANNON
If Priszm Income Fund's decision to seek creditor protection means anything to investors, it's this: Focus on the franchisers, not the franchisees.
Priszm, which owns more than 400 KFC, Taco Bell and Pizza Hut franchises across Canada, won protection from its creditors under the Companies Creditors Arrangement Act - but its units are now worthless, trading at a mere 8 cents each before the filing and not trading at all on Thursday when the protection was granted by a Toronto court.
This marks the end of a volatile investment. The units began trading in November, 2003, after Priszm raised $150-million in an initial public offering. The units debuted at $10 each, rose as high as $15 by 2004 but slumped soon after. They had traded below their IPO price since July, 2007, or nearly four years.
Meanwhile, Yum Brands Inc. , the franchisor that owns the KFC, Taco Bell and Pizza Hut brands, is in an entirely different space. With dramatic expansion into Asia, the shares have been consistently strong performers, and trade near record highs. Since 2003, when Priszm began trading, Yum shares have risen about 235 per cent, after factoring in dividends.
So, what would have happened if Priszm had invested its $150-million raised through its IPO in Yum shares rather than Yum restaurants? That money would now be worth a cool $500-million. Put another way, the $10 Priszm units that debuted in 2003 would now be worth $33.50.
David Berman