KFC operator in Israel seeks court protection over financial distress
Smart-Service K&K is asking a court to appoint a temporary trustee and freeze legal proceedings as it reports tens of millions of shekels in liabilities.
Smart-Service K&K, which operates KFC branches in Israel and is owned by Constantin Kotov and Andrey Oskolkov, has asked the Be’er Sheva District Court to appoint a temporary trustee as it struggles with financial difficulties.
The company is seeking a stay of legal proceedings against it and a ban on the sale or transfer of its assets, arguing that the measures are necessary to keep the business operating as a going concern. The application was filed under Israel’s Insolvency and Economic Rehabilitation Law.
According to the filing, the company’s liabilities include approximately NIS 37 million in shareholder loans, NIS 9.5 million in general unsecured debt, NIS 1.9 million owed to employees and NIS 1.2 million owed to government authorities.
The company attributes its cash-flow difficulties primarily to the economic fallout from the war and repeated security escalations. Since the October 7, 2023, Hamas-led attack and the subsequent outbreak of the Swords of Iron war, the filing states, the company has experienced a sharp decline in profitability as customer numbers fell, tourism was severely affected and consumer spending slowed.
At the same time, expenses increased as the company continued to establish and open new branches, putting further pressure on its finances. The filing also alleges that directives from Yum! Brands, the global owner of KFC, prohibited advertising during periods of conflict, contributing to a further decline in sales.
According to the company, successive rounds of conflict and security escalations, including those in April and October 2024, Operation Rising Lion in June 2025 and Operation Roaring Lion in February 2026, led to a sustained loss of business. Even when some branches were closed or operating at significantly reduced capacity, the company remained liable for rent and other fixed costs, further straining its cash flow.
The company also cites difficulties in obtaining additional funding from its shareholders, who are Russian residents. According to the filing, sanctions affecting financial institutions in Russia have prevented them from transferring additional funds to Israel or injecting capital into the business to support its operations.
KFC previously operated in Israel through various franchisees, but its operations in the country ceased in 2012. When the international chain returned, its global organization awarded franchises to two separate entities.
One was Mefco, which brought KFC back to Israel and opened the chain’s first branch in Nazareth in 2019, according to the filing. Mefco focused primarily on the Arab sector and operated as many as 12 branches. The filing alleges that the company ceased operations in 2025 following the October 7 attack and the ensuing economic crisis.
Smart-Service, which filed the current court application, was established in 2020 to develop a separate chain of KFC branches independent of Mafco. It currently operates 12 branches in Tel Aviv, Givatayim, Petah Tikva, Rishon LeZion, Kfar Saba, Netanya, Ashdod, Kiryat Ekron, Haifa and Kiryat Bialik.
The application was filed by attorney Evitar Kramer, a partner and head of the insolvency department at Weksler Bergman. Some of the company’s employees are represented by attorney Ofir Ronen.
Judge Yaakov Persky has scheduled a hearing for November 2. In the meantime, he has prohibited the company from settling past debts and barred transactions involving its assets.
Ahead of the hearing, Ronen said he would ask the court-appointed trustee to pay employees an advance equivalent to one month’s salary. He also intends to seek a tender to find a financially sound buyer for the chain as soon as possible, with the aim of preserving jobs and securing employees’ livelihoods.
