Both Taco Bill and Taco Bell will operate in Victoria after the Mexican food brands settled a long-running intellectual property dispute.

In a statement to the market on Thursday, Collins Foods said it had reached a settlement with Taco Bill which will allow the operation of Taco Bell restaurants in the state. Collins Foods is an ASX-listed franchisee of both Taco Bell and KFC in Australia.

Taco Bill and Taco Bell will coexist in Victoria after the parties announced a settlement of their legal dispute. Credit:Simon Schluter

The conditions of the settlement are yet to be finalised and are subject to the filing of final orders in the Federal Court. However, the company confirmed it would "continue to open and operate Taco Bell restaurants in Victoria".

In a statement, a spokesperson for Taco Bill said it had decided to not pursue the action. "It was a commercial decision," the spokesperson said.