LOUISVILLE, Ky., Feb. 2, 2011 /PRNewswire/ -- In ruling on a lawsuit brought by the franchisee controlled KFC National Council and Advertising Cooperative, Inc. ("NCAC") against KFC Corporation, the Delaware Chancery Court found in favor of the NCAC and KFC® franchisees.
In the lawsuit, the franchisees asked the Court to confirm that the NCAC had the authority to develop and approve its own advertising plans and strategy as well as to modify recommendations made by KFC Corporation ("KFCC"). KFCC claimed it had the "sole authority" to recommend advertising plans and strategy.
In a 65 page Opinion granting declaratory relief in favor of the franchisees, Vice Chancellor Leo E. Strine Jr. ruled that the NCAC (a Delaware Corporation) retains the authority to make advertising recommendations of its own or modify KFCC's recommendations and then vote on those recommendations by majority rule. The Court held that the franchisees were entitled to a declaration that the NCAC's franchisee controlled Board of Directors has the authority to adopt the advertising program of the NCAC by majority rule, and to include in that program, amendments to KFCC's proposals approved by a majority of the NCAC Board. The Court also ruled that KFCC has a duty to implement that plan in good faith.
"With this ruling, the NCAC is NOT limited, as KFCC contended, to a role of "up or down" votes on KFCC's advertising proposals with no right to amend those proposals or make its own advertising recommendations", said John R. Neal, Vice Chair of the NCAC. Rather, Neal said, "this ruling reaffirms KFC® franchisees' rights to develop and approve advertising, publicity, and promotion programs for the KFC® system in the United States."
Neal added that "the NCAC is pleased the lawsuit is behind us and we look forward to working with KFCC to move the brand forward in accordance with the Court's ruling."
SOURCE KFC National Council and Advertising Cooperative