On Monday, Judge Leo E. Strine Jr. of the Delaware Court of Chancery ruled that KFC and its franchisees must compromise on brand image and advertising strategies, giving KFC the ultimate authority over the brand's message.
The conflict first erupted a year ago between Yum! Brand’s KFC and KFC National Council and Advertising Cooperative Inc., which represents more than 80 percent of the chain’s franchisees, over the company’s advertising shift toward its grilled chicken line.
When the grilled chicken line was originally launched in May 2009, it became the primary focus of marketing efforts, including the "Grill Baby Grill" ads. But the group of franchisees said in its suit that the move ignored their input to keep the spotlight on the company's fried Original Recipe or Extra Crispy chicken products, and ultimately hurt business.
The franchisees argued for control of their own advertising plans and the right to modify those offered by the parent company. KFC countered that it had sole control over the brand’s advertising strategy.
Strine’s ruling called for a compromise and provided power to KFC to veto an ad campaign if it was inconsistent with the brand’s image.
“KFC Corp. has the exclusive authority to direct the national advertising agency, an authority that must include the ability to consider how KFC advertising positions KFC as a brand in its consumers’ minds,” Vice Chancellor Strine said.
Specifically, Strine ruled that KFC Corp. retains the right to hire, fire and direct the national advertising agency, and to air only those commercials that KFC believes in good faith to be consistent with its brand image.
“We’re very pleased with the Vice Chancellor’s decision today affirming that KFC Corp. has the exclusive authority to control the brand image and advertising,” said Roger Eaton, KFC president. “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.”
