United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Robert Blakey Judge
diversity case arises out of a dispute over a franchise
agreement between Defendant KFC Corporation and Plaintiff
Afzal Lokhandwala, a KFC franchisee. Plaintiff alleges that
Defendant breached their agreement by unreasonably attempting
to block him from telling customers that his KFC franchises
offer Halal chicken.
amended his complaint in August 2017. . Defendant moved
to dismiss that complaint for failure to state a claim, ,
and then filed a counterclaim seeking declaratory and
injunctive relief and attorney's fees, pursuant to the
franchise agreement, . Plaintiff moved to dismiss the
counterclaim for failure to state a claim. . For the
reasons explained below, this Court grants both motions to
The Complaint's Allegations
owns and operates eight KFC franchises in Illinois. 
¶ 1. He opened his first franchise in 2002, at which
point he entered into a franchise agreement with Defendant.
Id. ¶ 21. Plaintiff opened his second franchise
in 2006 and his third in 2010 before expanding to eight total
franchises in 2012. Id. ¶ 25. Each franchise
operates under an identical franchise agreement. Id.
says he identified selling Halal chicken as a lucrative
business opportunity as early as 2002, when he opened his
first franchise. Id. ¶ 19. “Halal”
refers to food prepared in accordance with Islamic laws and
customs. Id. When Plaintiff discussed selling Halal
chicken in 2002, Defendant's Franchise Director, Ken
Taft, promised Plaintiff that Defendant would approve him
selling Halal chicken. Id. ¶¶ 17, 20. Taft
confirmed in a 2016 email to Plaintiff that “KFCC did
indeed approve the use of Halal chicken.” Id.
with Defendant's “full knowledge and approval,
” Plaintiff started marketing and selling Halal chicken
in his original franchise after Taft helped him find a
Halal-certified (and KFC-approved) poultry processor.
Id. ¶ 23. Plaintiff says that several of
Defendant's executives “regularly” visited
his first franchise and knew that he sold Halal chicken.
Id. ¶ 24. Selling Halal chicken proved quite
lucrative-so lucrative that Plaintiff selected the locations
for the five franchises he opened in 2012 because of their
proximity to Muslim communities. Id. ¶¶
2003 through early 2017, all of the chicken-on-the-bone (as
distinct from other chicken products, like chicken tenders)
that Plaintiff's stores sold came from Halal-certified
poultry processors that KFC approved. Id. ¶ 29.
At present, 75 percent of Plaintiff's chicken-on-the bone
comes from Halal-certified processors. Id.
Consistent with both Illinois law on Halal foods and Islamic
rules, Plaintiff's franchises separate Halal and
non-Halal products from each other and inform customers that
they sell both Halal and non-Halal products. Id.
always bought his chicken-on-the-bone from processors that
the Islamic Society of Washington Area (ISWA) certified as
Halal-compliant. Id. ¶¶ 34, 35. From 2003
through October 2016, multiple processors gave Plaintiff
copies of their annual ISWA certificates confirming their
Halal certifications. Id. ¶ 36. Plaintiff says
that, from 2003 until late 2016 or early 2017, Defendant
approved the sale of Halal chicken in Plaintiff's stores,
helped him find Halal-certified processors and distributors,
and allowed him to obtain the annual ISWA certificates.
Id. ¶ 41.
2016 or early 2017, however, Defendant changed course and
demanded that Plaintiff stop marketing his products as Halal.
Id. ¶ 49. Defendant made this demand based upon
a 2009 KFC policy that prohibits franchisees from making
religious dietary claims about KFC products. Id. The
policy explains that KFC restaurants cannot offer Halal or
Kosher foods for two reasons: (1) people have different
interpretations of what satisfies the corresponding
processing requirements; and (2) Defendant cannot certify
that restaurant preparation and cooking processes would not
lead to cross-contamination between the Halal and non-Halal
(or Kosher and non-Kosher) foods. [27-2].
says that this policy contradicts the representations that
Defendant made to him when he opened stores in 2010 and 2012,
and runs contrary to Defendant allowing him to continue
advertising Halal products in his stores after the 2009
policy took effect.  ¶ 51. In fact, Plaintiff says
that Defendant failed to disclose the policy during
negotiations for Plaintiff to open new franchises in 2012,
and then approved Plaintiff's request to offer Halal
gravy in his stores. Id. ¶¶ 58, 63. Also,
the franchise agreement does not mention the policy.
Id. ¶ 50.
Defendant ordered Plaintiff to stop marketing his products as
Halal, Defendant also told Plaintiff to remove signs from his
stores that disclosed the Halal status, names, and addresses
of Plaintiff's chicken processors and distributors.
Id. ¶¶ 73, 76. Plaintiff believes that
Illinois regulations require him to post such signs because
he certified his franchises as Halal Registered Brokers with
the Illinois Department of Agriculture in 2017. Id.
¶¶ 72, 73.
survive a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), a complaint must provide a “short
and plain statement of the claim” showing that the
pleader merits relief, Fed.R.Civ.P. 8(a)(2), so the defendant
has “fair notice” of the claim “and the
grounds upon which it rests.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)). A complaint must also
contain “sufficient factual matter” to state a
facially plausible claim to relief. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly, 550 U.S. at 570).
facially plausible claim “allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678
(citing Twombly, 550 U.S. at 556). This plausibility
standard “asks for more than a sheer possibility that a
defendant has acted unlawfully.” Williamson v.
Curran, 714 F.3d 432, 436 (7th Cir. 2013). Thus,
“threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Limestone Dev. Corp. v. Vill. of
Lemont, 520 F.3d 797, 803 (7th Cir. 2008).
evaluating a complaint, this Court accepts all well-pleaded
allegations as true and draws all reasonable inferences in
the plaintiff's favor. Iqbal, 556 U.S. at 678.
This Court does not, however, accept a complaint's legal
conclusions as true. Brooks v. Ross, 578 F.3d 574,
581 (7th Cir. 2009). On a motion to dismiss, this Court may
consider the complaint itself, documents attached to the
complaint, documents central to the ...