KFC Advertising Disputed Before Delaware Chancery Court

KFC franchisees have reportedly made their closing arguments before a Delaware Chancery Court in a dispute over the company’s advertising policies. They contend that 1997 amendments to the company’s corporate documents gave them the authority to propose and approve different advertising recommendations. The lawsuit was apparently filed after KFC Corp. launched an advertising campaign for grilled chicken menu offerings, which the franchisees opposed for their potential to dilute the company’s fried chicken brand. According to a news source, the franchisees argued that while they can veto funding for advertising by majority vote, this power is illusory because KFC could institute delays, thus causing a blackout that would inflict significant damage on franchisees.

The company apparently countered that the franchisees do have the right to make recommendations or modifications to the company’s advertising policy and have exercised that right on several occasions. Still, the company reportedly indicated that the franchisees cannot have “plenary authority” over advertising strategy because that would interfere with the company’s investments in market research and brand development. See Product Liability Law 360, November 1, 2010.