Grilled or Fried? And What About the Brand?

Col. Sanders

For those of you who like to consider how trade marks play out in the broader socio-legal context, there is nothing better than a dispute between a franchisor and its franchisees. I acknowledge that a franchise also involves some combination of copyright, trade secrets (maybe even patents) as well as contract law and a smattering of competition law. But whatever the legal admixture of these additional elements, at the end of the day, a franchise dispute will invariably involve, directly or indirectly, the mark under which the franchised goods or services are sold and operated.

Once we go beyond the obvious mention of McDonald's, there is perhaps no more iconic franchise operation than KFC ("Kentucky Fried Chicken"). The image of Colonel Sanders, dressed in white, must certainly be one of the best-known instances where a founder has successfully fused his persona with the identification of his franchise operation (after all, how many of you could identify a picture of McDonald's founder Ray Kroc?). Disputes involving the KFC franchise therefore usually attract particular attention.

Such is the case in the item that appeared in the August 16-August 29 issue of Bloomberg Business Week. Entitled "At KFC, a Battle Among the Chicken-Hearted", reporter Burt Helm describes the dispute between some KFC franchisees and the franchisor company (Yum! Brands) over the company's decision in 2009 "to emphasize grilled chicken and sandwiches over KFC's bone-fried fare." According to the dissident franchisees, this move is responsible for falling sales at KFC (although this Kat wonders how one can disaggregate the effects of the Great Recession from this decline in sales).

Fried chicken and KFC have been identified with each other for as long as I can remember, and the slogan "finger lickin' good" was a short-hand way of conveying the centrality of the fried chicken product. One franchisee, whose affiliation with the operation dates back to 1963, recalled "fondly" how Colonel Sanders himself came to her franchise location, donned an apron, and showed her staff how to make (read: "fry") the chicken in accordance with the Colonel's Official Recipe (on which see here and here). As for today, however, not a chance: "They hire marketing guys with blue blazers who tell us what to do with our damn stores. But it's one thing to be behind the big mahogany desk calling the shots and another to be down the trenches", this franchisee observed.

A little more detail is appropriate here. Yum! Brands seems to have made a strategic decision to change the emphasis of the food fare offered by the franchisee restaurants in order to focus more on "health-conscious, on-the-go consumers." The result, at least in the eyes of the dissatisfied franchisees, is to "confuse customers and hurt the brand." In particular, the dispute focused on the "Unthink KFC" campaign, where the company sought to promote a grilled chicken product. Heresy, alleged some of the franchisees. who pooh-poohed the refocusing of the company's product image: "by and large the general public doesn't give a damn how many calories are in it."

Whatever the exact reason, the "Unthink KFC" campaign was dropped nationally in May of this year. But grilled chicken still remains a "bone" (sorry about that) of contention. A grilled chicken give away, launched on Oprah's television program, led to a much larger coupon redemption of grilled chicken products than the franchisees had in stock. The result was that franchisees ran out of food and had to confront angry customers. In addition to the unexpected additional costs that were borne by the franchisees for this promotion, it "started a continued downfall in trust." This promotion as well has been discontinued.

But where's the chicken?

And then there are the issues of short-term/long-term and differences in perspective. I suspect that at least some of the "guys wearing blue blazers" may be trying to take a longer-term, more strategic view of the placement of the KFC brand. If so, they will likely also be paying attention to matters such the perceived "healthiness" of their food products, for both regulatory and PR reasons. Franchisees will likely have a different time-line, where long-term changes in branding strategy must compete with tomorrow's sales figures at the restaurant till. This built-in tendency for possible divergence of opinion between these two sets of actors adds another level of complexity in the managing of this iconic brand.