Priszm Income Fund, which owns about 430 Yum! Brands restaurants in Canada, has filed for bankruptcy protection.

The move follows an order from the Ontario Superior Court of Justice. Priszm released a statement saying that the filing was made to extend its deal to sell its restaurants, which include KFC, Pizza Hut and Taco Bell, to a European franchisee within the Yum! Brands system.

In an attempt to remedy its financial woes, Priszm unveiled a restructuring plan in October that included closing 25 restaurants, selling 120 others and cutting distributions to the fund's shareholders.

During this process, Priszm withheld a $2 million franchise fee to Yum! Restaurants International, as well as a $975,000 interest payment. Yum! extended Priszm's contributing fee deadline, which was unmet.

Priszm's shortfall came about quickly. As recently as November 2009, the company extended several franchise agreements with Yum! The agreements also upgraded its system and renewed terms for 10-year franchise contracts covering a bulk of its restaurants.

After this week's bankruptcy announcement, Yum! Canada released a statement assuring that the brands are still open for business.

"The CCAA filing and sale process that Priszm has embarked upon creates an opportunity to restructure the KFC, Taco Bell and Pizza Hut businesses that Priszm currently operates for future growth and investment," said Sabir Sami, Yum! Restaurants International, Canada GM.

"Throughout the world, all three brands are strong and that includes Canada, where we have a committed team of restaurant operators, dedicated store-level teams, loyal customers and a lot of innovation and excitement in store for 2011," Sami added.

KFC's first Canadian unit opened in Calgary in 1953.

Yum! will continue to work closely with Priszm during this process. "The CCAA process gives Priszm protection to restructure its business and ultimately that will be positive for the brands in Canada," Sami said.

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