The two television adverts and a video on demand ad featured a group of carol singers outside a house singing the lyrics: "We showed up at your house again singing all our stupid songs", with the male homeowner replying: "Normally I'd hose you down, but now it just seems wrong."
Thirty viewers complained the lyrics "all our stupid songs" were likely to cause serious and widespread offence because they "mocked an element of Christian worship".
Kentucky Fried Chicken (KRC) said the campaign was a tongue-in-cheek and humorous look at the "commercialised hype" around Christmas. The company said the ad typified the perspective of a stereotypical grumpy old man, based on Charles Dickens' character Ebenezer Scrooge, who was usually irritated by everything about Christmas, particularly Christmas songs.
KFC said it was not its intention to mock any faith or religion and it did not seek to offend anyone.
The Advertising Standards Authority said: "Whilst we understood some people of the Christian faith felt the song lyric in the ad ridiculed their faith, we considered that most viewers would not interpret the lyrics as mocking Christianity (in total or in part) and concluded the ad was unlikely to cause serious or widespread offence."