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Was informed that Kroger will not make a sheet cake with the likeness of Obama on it and was told it is illegal to make a cake like that.
Does this have basis in fact in North Carolina? Or is Durham NC worse than I thought.
It's a real legal problem. The use of a "celebrity's" likeness for profit requires a license. There have been quite a few lawsuits about it. The store may be wary of it for that reason, as they don't have satire or news to rely on as a fair use argument. If you can find someone to do it free of charge, then no license is needed. You could say they're being over-cautious regarding the law, but the last thing they probably need right now is a lawsuit.
Try this link, it has a bunch of info about the law.
http://www.literarylawguide.com/cashinginonsomeoneelsescelebrity.pdfSinti