A Delaware state court has resolved an ongoing dispute regarding the control of advertising strategy in the KFC franchise system. In KFC Nat'l Council & Advertising Cooperative, Inc. v. KFC Corporation, No. 5191-VCS (Del. Ch. Jan. 31, 2011), the dispute was between KFC and its franchisees over the authority of the KFC National Council and Advertising Cooperative (NCAC) to determine the national advertising strategy for the KFC brand. KFC argued that it had sole authority to develop advertising plans, and the NCAC (whose governing body consists of 13 franchisee representatives and four KFC representatives, with each having equal voting rights) was limited to either accepting or rejecting the plans presented by KFC. To the contrary, the franchisees argued that the NCAC could accept, reject, or modify advertising plans presented, and sought a declaratory judgment confirming their interpretation of the NCAC’s authority. The court sided with the franchisees, noting that over the years, the NCAC had modified advertising proposals several times over KFC’s objections.
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