Saddled with complex local overheads and bureaucracy, Yum! Brands is to sell its western Indian KFC business.

The US fast food giant has some 700 fast food outlets throughout India bearing its KFC, Pizza Hut and Taco Bell brands, most of which are operated by franchise partners. However it directly owns its KFC operation in western India which has 18 stores.

The Economic Times reports online that Yum! wants to sell the business to a franchisee to avoid real estate costs such as rents, staff costs and other overhead expenses that are corroding its profitability.

According to The Economic Times, Yum!’s restaurant sales in the quarter to the end of September increased by 14 per cent thanks to a 26 per cent unit growth. But same-store sales declined four per cent in the wake of falling discretionary spending by Indians and the business posted an operating loss of US$3 million.

“Industry experts say operations run by local entrepreneurs bring down overhead costs substantially,” the article said.

“Typically, multinational firms prefer to leverage entrepreneurship of local franchise operators, and themselves operate on lower cost models while focusing on branding and customer relationships,” said Debashish Mukherjee, a partner at AT Kearney.

Yum! declined to comment on the report.