Court Watch

In 1997, as part of the settlement of a class action lawsuit between Kentucky Fried Chicken Corporation (“KFCC”) and its franchisee association, a new Certificate of Incorporation dealing with the governance of the KFC National Council and Advertising Cooperative (“NCAC”) was filed. The NCAC is a Delaware non-stock corporation that was founded more than 40 years ago to oversee the spending of the $150-million-plus in advertising funds collected annually from both company-owned and franchised KFC stores. The new Certificate of Incorporation divided various advertising duties and responsibilities between KFCC and the NCAC. The NCAC governing Committee has 13 franchisee members and four KFCC-appointed members. Under the agreement represented by the new Certificate, KFCC has the right to hire and fire the national advertising agency that develops and implements the annual KFC advertising program. KFCC also has the right under the Certificate to “develop national advertising, public relations and media plans and strategy.” However, among the powers of the governing committee of the NCAC is the power “to plan and approve each ensuing year's advertising program.” Over the years, KFC's advertising agency developed each year's advertising plan, the NCAC would approve or disapprove it, and then the agency would implement it. On occasion, prior to the system specified in the new Certificate, the NCAC would modify the plan before approving it.