Collins Foods, who also operates KFC in Australia and Europe, as well as Taco Bell, said it will be selling the chain, citing competition challenges from Guzman y Gomez.

However, if a buyer is not found within a year, Collins Food may be forced to close stores.

The change is part of a strategic review under new chief executive Xavier Simonet, the Financial Review report.

The review will see the company expand its KFC network more aggressively in Germany and write off more than $30 million of its business in the Netherlands.

"Discussions are currently underway with Taco Bell International (TBI) regarding a potential transition of the business to new ownership," Collins Foods said in a statement to 9 News.

"Collins Foods intends to complete the transition within the next 12 months, subject to formal terms being agreed.

"A further update will be provided, including estimated exit costs, as matters progress.

"If a new operator cannot be identified and/or an agreement cannot be reached, other exit options will be explored."

Taco Bell has 27 locations across Australia. The Mexican fast-food giant first opened a store Down Under back in 1981.

In 1997, Taco Bell made a second attempt to crack into the Aussie market but closed doors after eight years.

A third and final attempt was made in 2017, with plans to open more than 50 stores by late 2021.

Simonet said: "Collins Foods has successfully operated KFC restaurants for over 50 years, building a reputation as a trusted operator.

"In a challenging economic environment, the customer remains at the heart of our business.

"We will continue to deliver high-quality food at accessible prices, leveraging the heritage of the KFC brand at a time when consumer trust has never been more important."