AO 2005-14: Affiliation of regional trade associations composed of franchisee-members
The Association of Kentucky Fried Chicken Franchisees, Inc. (AKFCF) is a federation of trade associations that is affiliated with regional trade associations composed of Kentucky Fried Chicken (KFC) franchisees. As a result of that affiliation, AKFCF may solicit contributions to its separate segregated fund (AKFCF PAC) from the owners and executive personnel of incorporated franchisee-members of the domestic regional trade associations, as well as the individuals and unincorporated franchisees that are members of those regional associations.
Background
AKFCF is an incorporated nonprofit trade association. Its membership is composed of ten separately incorporated regional associations (seven domestic and three international)¹ , the members of which are KFC franchisees. Under the bylaws of AKFCF and its domestic regional associations, franchisee-members select regional leaders who comprise the majority of AKFCF’s highest governing body. AKFCF’s bylaws further specify that its principal officers must be past or current officers of one of the regional associations.
Federation status and affiliation
The Commission has concluded in past advisory opinions that an entity is a federation of trade associations when a significant portion of its board of directors consists of representatives of regional trade associations, and the trade associations participate as principal or important units in the governance of the federation. See AOs 1998-19, 1995-17 and 1977-44. Consistent with those opinions, the Commission determined that AKFCF is a federation of trade associations.
Additionally, based on facts leading to the conclusion that AKFCF is a federation, the regional trade associations are considered affiliated with AKFCF. Specifically, their relationship with AKFCF meets several of the affiliation factors listed in the Commission’s regulations, including the ability to direct or participate in AKFCF’s governance, the overlap in directors and officers between AKFCF and its regional associations, and the establishment of AKFCF by the regional associations. See 11 CFR 100.5(g)(4).
Soliciting the solicitable class of corporate members of regional associations
Under 114.8(g)(1), a federation of trade associations may solicit PAC contributions from the members of its regional, state or local affiliates or members, provided that they qualify as affiliated entities (as explained above). A trade association or a trade association federation (or its PAC) may not solicit contributions from member-corporations themselves, but may solicit contributions from the stockholders and executive and administrative personnel, and their families, (“solicitable class”) of the member-corporations that separately and specifically approve the solicitations for a calendar year and have not approved a solicitation by any other trade association for that year. 11 CFR 114.8(c). Because AKFCF and its regional associations are affiliated, AKFCF and its PAC may solicit PAC contributions from the solicitable class of the incorporated franchisee-members of the domestic regional associations that have given AKFCF such prior approval on an annual basis. 11 CFR 114.8(g)(2).²
Soliciting unincorporated and individual members of regional associations
AKFCF and its PAC may also solicit unincorporated franchisee-members for contributions to the PAC, and need not obtain prior approval to do so. 11 CFR 114.7(a) and (c). For members that are unincorporated business entities (e.g., partnerships or LLCs that elect tax treatment as partnerships and do not have publicly-traded shares), AKFCF may address its PAC solicitations to the one or two individuals who normally represent the business in its dealings with AKFCF or a regional association, but the solicitation may ask for contributions only from the unincorporated entity itself, not from the one or two representatives or from the stockholders or executive or administrative personnel of the member. AKFCF may also solicit contributions from franchisee-members who are individuals, and the families of those individuals.
AKFCF may also solicit contributions from the executive and administrative personnel (and families) of its regional associations. 11 CFR 114.8(i)(2).
Date Issued: October 20, 2005; Length: 8 pages.
¹ The request stated that members of the international regional associations would not be solicited for contributions to AFKCF PAC.
² The requirements for properly requesting prior approval from a corporate member of a trade association are described at 11 CFR 114.8(d) and (e).