020329 Tricon to Unite Taco Bell, Long John Silver's

Don't be surprised if you see flat-bread fish sandwiches and clams on the menu the next time you visit your local Taco Bell. The Mexican fast-food chain will see several of its units spilt in half--as if by asexual reproduction--to make room for fish restaurant Long John Silver's.

Tricon Global Restaurants The fast-food splicing is brought to you by Tricon Global Restaurants, the Louisville, Ky.-based company that owns about 30,000 Kentucky Fried Chicken, Pizza Hut and Taco Bell units. Today the company added two more names to its table, acquiring Long John Silver's and A&W All- American Food Restaurants (the chain known for root beer and hot dogs) for $320 million in cash.

With the acquisition, Tricon trumpeted its innovation in multi-branding at its locations: putting two brands under one roof. The restaurants are typically divided in half, with one side, for example, occupied by a Pizza Hut and the other by a Kentucky Fried Chicken. The sub-restaurants have their own kitchen, menu and counter. Tricon has already co-branded 7% of its U.S.-based units, which, the company asserts, has already driven "significant increases in average unit volumes and profit."

Housing different brands under the same roof works, according to Morgan Stanley analyst Michael Sherrick. Parents, for example, like that they can eat pizza while their kids have burritos. More important, it is a more cost-effective way to expand, he says. "You don't have to go through the whole real estate process of adding another unit. That process can take up to a year."

There are other benefits. "Because its restaurants offer a wide variety of meal types," Sherrick wrote in a research report, "Tricon has achieved one of the highest numbers of customer visits per month in the industry. The multiple brands have also helped Tricon diversify its business model and smooth out its revenues at times of sudden shifts in demand."

One possible drawback to this tactic is that it can dilute a brand name. McDonald's, for example, is not expected to use such multi-branding because it is wary of the dilution. Sherrick says that the chances of that happening to Tricon at the outset are not that great, especially as he expects only 15% of its restaurants to be multi-branded in the near term. The firm may have a problem instituting a larger multi-branding initiative because franchisees, which own 80% of the units, may be unwilling to foot the approximately $250,000 to $300,000 bill to add another restaurant.

Tricon, which also announced that it will change its name to reflect its ticker symbol-- YUM--said it has not sated its acquisitive lust. Chief Executive David Novak said today the company is "scouring the marketplace" for small, underdeveloped chains "that have great products that would be a perfect fit with Pizza Hut," according to Dow Jones News Service.

One company that may fit the bill is Back Yard Burgers, which already has a multi-branding deal with Tricon. Investors may have already caught wind of a possible move, unfortunately: Back Yard Burgers' stock has risen almost 60% this year.

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