KFC will be allowed to tell a Muslim Chicago area franchisee he is not allowed to advertise the use of halal chicken at his Chicago area restaurants, after a federal judge ruled the fast food chain’s franchise agreements can give the mother brand the power to restrict restaurant owners’ advertising decisions.
On Jan. 23, U.S. District Judge Robert Blakey granted KFC’s request to dismiss the lawsuit brought by plaintiff Afzal Lokhandwala, who had accused the iconic fried chicken seller of violating his franchise agreement when it allegedly reneged on previous assurances, and ordered him to stop advertising chicken for sale at his restaurants that has been dressed and prepared in accordance with Islamic religious rules.
“Without expressing any view on whether Defendant (KFC) acted reasonably by instructing Plaintiff not to advertise his products as Halal, this Court finds that the franchise agreement does not impose any specialized, overarching reasonableness requirement to (KFC’s) decisions about advertising,” Judge Blakey wrote.
The case landed in federal court in 2017, when Lokhandwala first complained to the court of KFC’s demands.
According to his complaint and other court documents, Lokhandwala owns and operates eight KFC restaurants in Chicago and the suburbs, including Lombard, Bloomingdale, Carol Stream and Streamwood, among others.
Lokhandwala, who is Muslim, rose through the management ranks at KFC after immigrating to the U.S. in 1989, and opened his first area franchise KFC restaurant in 2002. He quickly realized there was a market for fried chicken among area Muslims, who were seeking to buy halal-certified chicken from a shop operated by a fellow adherent of Islam.
Lokhandwala said he secured agreements to buy chicken from Rosebud Farms, a local supplier of halal-certified chicken, whose products were also acceptable to KFC.
Lokhandwala said his sales of halal-certified chicken then boomed, amounting to millions of dollars in sales, which allowed him to open additional restaurants through the years, strategically locating his restaurants near communities with relatively large Muslim populations, to whom he could market his halal products.
Lokhandwala asserted KFC initially signed off on his marketing plan, helping him “find Halal-certified processors and distributors, and allowed him to obtain the annual … certificates” from the Islamic Society of Washington Area, a group that certifies foods as halal-compliant.
However, a little more than a year ago, Lokhandwala said KFC “changed course and demanded that (Lokhandwala) stop marketing his products as Halal.”
According to the judge’s decision, KFC said a 2009 chainwide policy “prohibits franchisees from making religious dietary claims about KFC products” because “people have different interpretations of what satisfies the corresponding processing requirements” and Lokhandwala could not “certify that restaurant preparation and cooking processes would not lead to cross-contamination between the Halal and non-Halal.”
Lokhandwala contended this apparent shift in KFC’s position on the question was a breach of contract.
KFC, however, argued its agreement actually gives it the “absolute right” to control its franchisee’s marketing plans and promotions.
Judge Blakey agreed with KFC’s position. The judge said, in this case, under Kentucky state law, which controls KFC’s franchise agreements, Lokhandwala lacks a leg to stand on, as the franchise agreement imposes “many obligations” on franchisees, “including adhering to (KFC’s) ‘reasonable present and future requirements.’”
Simply because the chain had waited until 2017 to enforce its 2009 policy against marketing based on religious food rules, doesn’t mean the company forfeited the right to enforce the policy under its franchise agreement, the judge said.
Blakey dismissed Lokhandwala’s lawsuit with prejudice.
Lokhandwala is represented in the case by attorneys with the firms of Goldberg Law Group LLC and Leinenweber Baroni & Daffada LLC, each of Chicago.
KFC is defended by the firm of Jenner & Block LLP, of Chicago.