Kentucky Fried Chicken shuts down all its operation including its sister chains, Pizza Hut and Taco Bell of Kathmandu in Aug 29th 2012 after the management runs into an issue with the restaurant employees. Employees claim over the violation of the labors right by the managers to form a labor coalition. However, management in turns accuses the employees for vandalism and physical threats. According to Nawaraj Bhatta, a team of 66 staff members had applied for the registration of ANHRWU-R at the Labor Office on August 7 to form a labor coaltion of which the Restaurant managers were completely disagreeing about. Therefore, they must have shut down the restraurant as a form of retaliation against the coalition initiative. On the other hand, Krishna Sharma, the country Human Resource Department chief reported unacceptable manhandling, vandalizing and extorting activities by the Maoist affilated labor union members that compelled the manager to shutdown its outlets for indefinite period.

KFC started its operation in November 2009 under the franchise ownership of Devyani International Ltd. (an Indian holding) in two major areas of the capital. This country had recently underwent the close downs of other multinational companies, i.e. Surya Nepal Pvt. Ltd and Colgate Palmolive due to similar problem regarding labor issues before this issue came ahead.

The weak regulation of the government and inability of the government and the labor parties to come under a consensus has often been blamed as the hindrance for the industrial development of the country. This kind of indefinite closure can harm the country in term of employment losses, supply-chain effects, tax and export revenue.

KFC franchise in Nepal hires 180 employees in combined from both of its outlets in Durbarmarg and Thapathali and also remains as the highest tax payer for the Nepal government.