Yeah, and then Yoshi says he refuses to let Mario order him around any more. I thought it was clear that Mario and Yoshi are friends and partners! Besides, Yoshi can drive! He's smart enough to say no if he doesn't want something to happen!
I'm almost certain they did this without Nintendo's permission. The were no copyrights or trademarks listed, and Nintendo is pretty protective of their star mascot outside of their intended use. They don't like to give the guy away to just anyone, and usually, they only do it when it should benefit them a lot. Making an enemy out of KFC/Pepsi is not their idea of a good business deal. Nintendo had nothing to do with this.
Also, the point of the game is not to educate you about how chickens are treated at KFC. The true point is to make the inside of KFC look disgusting to anyone who plays, so that when he or she thinks of KFC, he/she things of a dirty, greasy, rat and bug filled restaurant. That became pretty obvious once you get in the building. The entire thing disgusts me, because it's pretty underhanded, especially when you consider the high chance that if KFC were to give away their chickens to PETA, PETA would likely anesthetize them in a van a few yards away. Such a wonderful organization, huh?