Franchises sue KFC over shift to grilled chicken

Is the future grilled or fried?




At Kentucky Fried Chicken, the name once said it all. But the world's most popular chicken chain is betting heavily that its grilled chicken -- which racked up nearly $1 billion in sales in its first year -- is the Next Big Thing. That has angered a coalition of franchise owners, who run most of the restaurants and believe the focus should remain fried.



The simmering dispute erupted into a lawsuit filed by franchisees this week that claims KFC management ignored their pleas to stay true to the colonel's original recipe for a product that could be no more than a flash in the pan, and instead devoted the advertising budget to promoting the new grilled chicken.



The company "appears to believe that the future of KFC lies with grilled chicken rather than fried Original Recipe or Extra Crispy chicken products," the franchisees asserted in the suit.



In a written response yesterday, KFC parent company Yum! Brands called the lawsuit "baseless."



"Yum Brands fully expects to win the suit and minimize the waste of time and money spent on it so that we can continue to satisfy our customers and grow the business," said Jonathan Blum, a senior vice president at Yum.



Nutritionists are fond of reminding us that fried won't make us fit, and Yum chief executive David Novak told analysts recently that the lack of healthy options on the menu was keeping some customers away. Grilled chicken was the answer, with 70 to 180 calories and four to nine grams of fat. Original Recipe fried chicken has 130 to 360 calories and eight to 24 grams of fat.



But what Americans think they should eat isn't always what they actually eat. Jim Cocolin, second vice president of the Association of Kentucky Fried Chicken Franchisees, said fried chicken still rules the roost at his restaurants.



"We need both, but our fried is 80 percent of our business," he said. "That kind of speaks for itself right now."



The furor over the fowl began in 2008, according to the suit, when Yum tapped Roger Eaton, who had led KFC's international divisions, to oversee the brand. That included dealing with the KFC National Council and Advertising Cooperative, which represents KFC franchise owners in the company's marketing decisions.





The suit claims that under Eaton's tenure, KFC executives began dismissing franchise owners' input, refusing to attend meetings and adopting a take-it-or-leave-it attitude. The owners filed suit to force the company to recognize their standing and suggestions. In particular, the suit said, KFC let fried chicken get soggy over the past year while marketing its grilled chicken.



Last spring, the company launched the grilled chicken -- dubbed KGC -- by proclaiming an UNFry Day. Ads encouraged customers to "unthink KFC" and established a new "grill nation." It held a Myspace contest to hunt for a new colonel. And when Oprah offered a coupon for a free KGC meal on her show in May, hungry customers formed block-long lines at restaurants across the country.



"Kentucky Grilled Chicken has been an unqualified success," Novak told analysts in Yum's most recent earnings call. "We needed to broaden the appeal of this brand and we have done it."



Perhaps this is just a case of too much of a good thing. Chicken -- in any form -- is the second most popular food in America after sandwiches, according to NPD Group, a consumer behavior research firm.



NPD estimates fried chicken, including nuggets and strips, accounted for about 13 percent of meals ordered outside of homes for dinner. Non-fried chicken was about 10.6 percent of meals. All together, chicken makes up nearly a quarter of dinners.



"This country still likes fried chicken," said Harry Balzer, senior analyst with NPD. But, he added, "what we're always looking for is new versions of the things we love. The more important it is to us, the more variety we're looking for."