CHICAGO — A federal judge's recent decision to allow KFC to tell a Muslim franchise owner to stop advertising his halal chicken should serve as a reminder that, when it comes to franchise business relationships, the parent brand has the final say on all matters of public perception, a business attorney said.
In late January, U.S. District Judge Robert Blakey dismissed a lawsuit against KFC, ruling the restaurant chain is not required by any law to allow a franchise owner to advertise that their chicken is halal.
In light of this decision, franchisees will need to ensure they follow the contract they signed, said attorney A. Christopher Young, of the firm of Pepper Hamilton LLP.
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"Franchisees need to understand that,by doing business as a franchisee, they will need to cede control of advertising and setting quality product and service standards to the franchisor for the sake of uniformity," Young said.
Although courts have often judged cases between franchisors and franchisees, “the religious aspect of this case is novel,” Young noted.
Franchisee Afzal Lokhandwala claimed KFC’s ban on the use of advertisements telling customers that the chicken at his KFC restaurants were halal would violate the Illinois Halal Act, but the court dismissed the argument, stating that the Halal Act didn’t apply to a franchised restaurant.
The religious aspect may be new, but the ruling in this case makes it clear that franchisors are the ones in control. Young noted KFC was within its rights to stop Lokhandwala from any further advertising that claims the chicken is halal, or certified by certain Islamic religious authorities as religiously acceptable for consumption by observant Muslims.
“This case is about who can control what is said to consumers about the branded products and/or services offered at a franchised place of business…" Young said. "The franchisor should reserve exclusive control of advertising and setting quality standards of the trademarked products and services for the good of the franchised system.”
A practicing Muslim, Lokhandwala bought his first KFC in 2002 after noticing there were not many restaurants in the area that served halal chicken, a method of preparation in compliance with Islamic law. Lokhandwala opened a total of eight KFC locations and became successful by opening his restaurants in Muslim communities and advertising that his restaurants had halal chicken.
KFC allegedly agreed to let him advertise the halal chicken and even assisted in his advertising, according to Lokhandwala’s complaint. KFC implemented a policy in 2009 that barred franchise owners from making claims that the food complied with any religious or dietary needs, but did not take any action against Lokhandwala until 2017.
KFC cracked down in 2017 and told Lokhandwala he could no longer advertise the fried chicken was halal.
Lokhandwala claimed breach of contract and bad faith in his lawsuit. Lokhandwala also claimed not being allowed to advertise halal chicken would probably force him to close certain restaurants because practicing Muslims, a key part of his customer base, may shy away from eating there.
KFC stated that it had the “absolute right” to control the advertising of any of its locations according to the franchise agreement that Lokhandwala signed, which the court agreed with. The court emphasized KFC did not breach the contract simply because it hadn’t previously enforced its policy.
Young said the religious aspect doesn’t change anything and that franchisees must adhere to the contract they signed, regardless of what they have done in the past or if it was approved.
“If they want to advertise their products and services themselves, they should not become a franchisee,” he said.