Encanto Restaurants filed for bankruptcy in federal court under Chapter 11 of the Federal Bankruptcy Code after the sudden closure of its Taco Bell and Kentucky Fried Chicken (KFC) fast-food restaurants in Puerto Rico triggered a business crisis. One of the main triggers was the breakdown of its commercial relationship with Yum! Brands, the multinational parent corporation of both brands.
Yum! Brands decided to withdraw the operating rights, alleging that Encanto Restaurants no longer met the expected levels of quality, consistency and operational standards. The company was reported to be facing a severe financial situation, with massive debt of $123.9 million.
The closures also created job uncertainty, with more than 3,000 employees affected, who had not been told beforehand about the company’s status. Employees were informed through a letter that their jobs with Encanto Restaurants ended on November 1, 2026.