UPDATE 1-Restaurants say big refranchising deals hard to do

(Rewrites first paragraph, adds details about Brinker deal, byline)

By Lisa Baertlein

LOS ANGELES, April 23 (Reuters) - Restaurant companies, which aim to boost profits by selling company-owned outlets to franchisees, say tight lending standards have made it difficult to close big refranchising deals.

YUM Brands Inc (YUM.N: Quote, Profile, Research), which operates the Taco Bell, KFC and Pizza Hut fast food chains, said on Wednesday that lenders are requiring 35 percent equity or more on larger deals -- more than the 25-plus percent the company has traditionally required.

"The banks are requiring 35-plus equity to lend, and it's hard for the buyers in some cases to make that work," Yum Chief Financial Officer Richard Carucci said in the company's earnings call with analysts.

"On the small deals we're able to still make that work, because people have equity in their existing business," he said.

Selling restaurants reduces company sales, but improves profit margins because the company collects more franchise fees without having to operate restaurants.

Yum, Brinker International Inc (EAT.N: Quote, Profile, Research), the owner of Chili's Grill & Bar owner, and CKE Restaurants Inc (CKR.N: Quote, Profile, Research), the owner of Carl's Jr, are among the operators that have been selling company-owned eateries to franchisees.

Brinker executives on Tuesday blamed challenging credit markets for cratering a deal to sell its Romano's Macaroni Grill Italian-themed chain, saying the suitor was unable to get needed financing to close. (Reporting by Lisa Baertlein; Editing by Brian Moss/Jeffrey Benkoe)