Business

Judge tells KFC, franchisees to cooperate on ads

LOUISVILLE — KFC and its franchisees have been told to cooperate on advertising strategies as part of a Delaware judge's ruling Monday that delves into the fried-versus-grilled chicken dispute.

The franchisees argued in the non-jury trial in Delaware Chancery Court that their KFC National Council and Advertising Cooperative had authority to develop advertising plans as well as to modify those offered by KFC. KFC countered that it had sole control over advertising strategy.

Judge Leo E. Strine Jr. ruled both parties could provide give-and-take to the process.

The legal dispute was the result of disagreements over whether advertising should stress KFC's traditional fried chicken or a grilled alternative that debuted in 2009.

While KFC executives wanted to promote a more healthful alternative, many franchisees "believed that, for better or worse, many of KFC's customers were mainly hungry to purchase good old-fashioned Kentucky Fried Chicken, with any deviations from the traditional being more in the direction of Extra Crispy than Extra Healthy," the judge said in his ruling.

Strine wrote that "the honeymoon period for Kentucky Grilled Chicken was short-lived."

By summer 2009, sales had started to decline, he said.

Franchisees became restless over what they saw as KFC's preoccupation with grilled chicken at the exclusion of its core fried chicken — a mind-set he said franchisees referred to as "grill, baby, grill."

He said KFC and its franchisees rely on each other, and each side would be foolish to ignore the other's proposals.

He noted KFC, owned by Louisville's Yum Brands, could nix an ad campaign it thinks would hurt the brand, citing the fictitious example of "All Fat, All Fried, All The Time."

The legal fight dealt exclusively with KFC's marketing strategy in the United States.

"This lawsuit was always about retaining rights, not gaining rights, and we are pleased the court has affirmed that the franchisees do not have authority to run ads which KFC Corp. deems to be inconsistent with its brand image," KFC President Roger Eaton said in a statement.

Attorneys for the franchisees did not return calls seeking comment.

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