KFC, a subsidiary of Yum Brands Inc. (NYSE:YUM) along with Pizza Hut and Taco Bell chains, is suing three Chinese companies over spreading rumors online claiming that it has been using eight-legged chickens.
KFC stated that the three companies - Ying Chen An Zhi Chenggong Culture Communications Ltd, Wei Lu Kuang Technology andLing Dian Technology – posted false pictures and articles on social media that the chickens have eight legs and six wings. The company is seeking 1.5 million yuan ($242,000) for compensation and an apology. Founder of Kantar Media CIC stated, “China’s social media is full of companies that will create content – positive and negative – for brands.” Yum attempts to gain consumers back through this lawsuit. Roughly half of Yum’s revenue is generated from China.
The rumor, with last year’s expired meat scandal, has affected Yum’s performance. Sales were down by 9% since last year and profit and revenue declined, according to the first quarter report. The stock was down by -1.84% of $90.11 at previous close with a 52-week-high of $95.90. “We will deliver full-year EPS growth of at least 10%, with a strong second half in China and solid brand-building initiatives under way at each of our divisions,” said Chief Executive Greg Creed.
The company’s next quarter earnings will be announced on July 14.