Pepsico Inc. announced yesterday that it would spin off its KFC, Pizza Hut and Taco Bell restaurant businesses as a publicly traded company, one that would be second only to McDonald's in the fast food market.

Wall Street has long advocated a spinoff of Pepsico's struggling fast-food unit to allow the company to better focus on its Pepsi beverage operations and Frito-Lay snack business, whose international profits jumped 16 percent in the first nine months of 1996.

''We need to bring all our human and financial resources to bear on our soft-drink and snack businesses,'' Roger A. Enrico, Pepsico's chairman and chief executive, said, adding that the company's goal was to ''dramatically sharpen Pepsico's focus.''

In an interview, Mr. Enrico said the company planned to spin off 100 percent of the restaurant unit to stockholders, who would receive shares in the new company. He said Pepsico would seek rulings from the Internal Revenue Service to get a tax-free distribution to shareholders and added that Pepsico would not assign any of its current $9 billion of debt to the new spinoff.

Pepsico has not yet determined the valuation of the new company's shares, but analysts estimated that it could be $4 to $6.

Pepsico shares rose as much as 12 percent in heavy trading on The New York Stock Exchange yesterday after The Wall Street Journal reported that a spinoff was expected. Pepsico made its announcement after the stock market closed, with shares of its stock up $3.50, or nearly 11 percent, to $35.50, on a day the Dow was off 94 points.

Several analysts predicted that the target share price for the post-spinoff Pepsico could be in the low $40's. But Roy D. Burry, a securities analyst for Oppenheimer & Company, said that yesterday's rise in the stock price ''has already discounted any benefit from a spinoff, and we see Pepsico as a mid-$30's performer.''

Mr. Enrico said the possibility of a spinoff was considered the last two years but that Pepsico began actively considering it in November.

''The timing of the announcement was a surprise,'' Andrew J. Conway, a beverage analyst for Morgan Stanley & Company, said. The hard-charging Mr. Enrico often voiced a strong commitment to the fast-food chains. He recently shuffled their managements and was carrying out a money-making strategy of selling off units to franchisees. A spinoff was considered a long-term option by many.

Pepsico's 13-member board, however, endorsed the spinoff plan unanimously yesterday in a three-hour meeting that ended at 4:30 P.M. The board must yet decide whether to approve a definitive spinoff plan, which is expected to be completed by the end of the year. Merrill Lynch & Company will be the financial adviser, the company said.

Mr. Enrico said that before the spinoff would be accomplished, Pepsico intended to sell off its casual-dining businesses, including the California Pizza Kitchen and Chevy's Mexican restaurants. The company will also seek to sell the Pepsico Food Systems Unit, which distributes restaurant equipment.

In sales and in market capitalization, Pepsico's restaurant spinoff would be smaller than that of the McDonald's Corporation, but its store tally would be greater. In 1995, Pepsico had 28,518 restaurants worldwide, 20,515 of them in the United States, nearly twice McDonald's total of 11,368 in the United States. Pizza Hut had 8,883 American stores, Taco Bell had 6,490, and KFC had 5,142.

In 1995, Pepsico had systemwide sales -- or the total sales generated at stores for both the fast-food chain and the franchise owner -- of $13.8 billion, compared with $15.9 billion for McDonald's.

Analysts said that the benefit of spinning off the restaurant unit outweighed losing the huge sales the restaurants had generated. Although the restaurants accounted for more than a third of the company's sales of $30.4 billion in 1995, they contributed only 22 percent to profits.

Pepsico ''had a terrible year in 1996, and they had to do something bold and dramatic,'' Martin Romm, an analyst with Credit Suisse First Boston, said. The company took a $520 million charge in the third quarter, largely to revamp the international beverage business and eliminated nearly 10 percent of its international work force by the end of the year.

But the 52-year-old Mr. Enrico, who took over the helm last April, insisted that the spinoff was not a response to the need ''for drama or quick fixes.''

''But I think our share price has been undervalued,'' he added, ''and I have confidence that what we're doing will fix that.''

When badgered about a spinoff by participants at a meeting of 200 securities analysts last year, Mr. Enrico reaffirmed his commitment to the business and his strategy of selling larger numbers of underperforming units to Pepsico's franchisees.

Furthermore, the idea of a spinoff goes against Pepsi's tradition of tinkering with businesses until they work. ''They don't have a track record of getting rid of their businesses,'' said Ronald N. Paul, president of Technomic Inc., a Chicago-based restaurant consultant.

Pepsi, however, ''wanted to take advantage of the bull market now by spinning off the restaurants immediately,'' said John Sicher, publisher of Beverage Digest, an industry newsletter in Old Greenwich, Conn.

Mr. Enrico disagreed. ''The market had absolutely nothing to do with the spinoff,'' he said. ''It seemed that this was the right time for it.''

Wall Street has long clamored for a quick separation of the restaurants from Pepsico. ''A restaurant spinoff is the single most important operational decision that Pepsi could take to benefit its stock,'' Emanuel Goldman, an analyst for Paine Webber, said.

To investors, ''a spinoff makes sense because it would relieve Pepsico of the burden of the restaurants' capital expenditures,'' said Anne M. McDermott of Sovereign Assets Management, a subsidiary of John Hancock Funds that has 880,000 Pepsico shares.

Pizza Hut and Taco Bell, the company's two biggest chains, have recently been struggling to stay profitable. And although Pepsico's smallest chain, KFC, has been back on track, it has perennially been the black sheep of Pepsico's restaurant family since it was bought in 1986.

Restaurant spinoffs are not always successful. In 1995, General Mills Inc., announced that it wanted to concentrate on the company's consumer-foods products, and spun off its Red Lobster and Olive Garden chains as Darden Restaurants Inc.

But though it was expected to go public at $12 to $13 a share, Darden began trading at $9.75 and has fallen to the mid-$7 range. ''Darden hasn't done very well on its own, in earnings or in stock performance,'' Mr. Paul, the industry consultant, said.

But Mr. Sicher said that the Pepsico spinoff would perk up the company's lagging fountain business, sales of high-margin concentrate to restaurants, convenience stores and food-service companies. Such sales amount to nearly a quarter of the soft-drink industry. ''Coke has over 60 percent of that business, in comparison to Pepsi in the low 20 percent,'' Mr. Sicher said.

''Whenever Pepsi would go to Burger King or Wendy's, those chains would say, 'If we buy your beverages, it'll help you to compete with us,' '' Mr. Sicher said. ''Their competitors didn't want to help out KFC, Pizza Hut and Taco Bell.'' The Pepsico chains only sell the parent's beverages.

The Coca-Cola Company had no comment about the spinoff.

Question:

You read an article about Pepsi's decision to exit the restaurant business. When Pepsi was acquiring Taco Bell, the company stated: "Pepsi seeks profitable arenas in which it can sell soft drinks. Because of the high margins that restaurants are able to charge in selling soft drinks, buying restaurants represents a good growth opportunity." Taco Bell was not the only chain Pepsi acquired.

underline your key points for why Pepsi's enterprise value did not increase through owning restaurants that sold fountain drinks (which had high margins).