McDonald’s 169 outlets in north, east India stare at closure as the American popular food giant on Monday announced termination of its franchise agreement between its India arm McDonald’s India Private limited (MIPl) and Vikram Bakshi-headed Connaught Plaza Restaurants ltd (CPRl), alleging breach of contract and payment default.
The US-based fast-food chain runs a total of 430 outlets in India. The company said on Monday that it is shutting 169 restaurants in India, closing all McDonald’s outlets in north and east India, including New Delhi. However, its outlets will remain open in south and west India, where it uses a different franchise operator Hardcastle Restaurants Pvt ltd, which operates 261 McDonald’s outlets in western and southern India. It further said it would look for a new partner later though.
As part of the termination, CPRl is required to cease to use McDonald’s name, system, trademark, designs and its associated intellectual property, among others, within 15 days of the termination
notice. The decision comes weeks after 43 outlets run by CPRl in the national Capital were shut due to non-renewal of eating house licences.
“We have been compelled to take this step because CPRl has materially breached the terms of the respective franchise agreements relating to the affected restaurants,” the company said in a statement.
In its statement, McDonald’s India also said it ended agreement as CPRl failed to remedy the breaches (to terms of pact), despite being provided with an opportunity to do so in accordance with the agreements. “A priority will be given to mitigate the impact on affected parties such as employees, suppliers and landlords and it is open to working with CPRl to achieve this,” it added.
However, McDonald’s Corporation Global Head of Corporate Relations, Foundational Markets, Ron Christianson told a leading news agency, “The termination is essentially because of CPRl’s violation of certain obligations as part of the agreement, including a default of payment of royalty to MIPl.”
“It has been two years since the royalty had not been paid and CPRl has been provided with an opportunity to remedy those breaches but they have failed to do so,” he added.
Responding to the termination notice, Bakshi said the decision is an open challenge to the National Company law Tribunal (NClT) judgment, which had directed the CPRl board to meet to discuss various issues. “The timing of this notice is hugely suspected because it comes on the morning of the first board meeting, scheduled by the administrator, a former Supreme Court judge appointed by NClT,” he added.
“This is a completely contemptuous, malafide and yet another oppressive act indulged in by the McDonald’s,” said Bakshi said, adding that CPRl is considering the appropriate legal remedies that are available under law.
He further said one of the items on the agenda was to discuss the re-opening of the 43 restaurants whose operations lie currently suspended. The popular fast food chain, which is known for graduating people from vada pao to a range of burgers, has seen its fortunes declining since past few years over a tussle with Bakshi for the management of CPRl after he was ousted from the post of managing director of the joint venture company in 2013.
However, McDonald’s India said, “We have been compelled to take this step because CPRl has materially breached the terms of the respective franchise agreement relating to affected restaurants and has failed to remedy the breaches, despite being provided with an opportunity to do so in accordance with the agreements.” In 2013, McDonald’s voted against the re-election of Bakshi as the Managing Director of CPRl, following which Bakshi challenged his removal in the Company law Board (now the National Company law Tribunal), accusing McDonald’s of mismanagement and oppression. later in 2013, McDonald’s revoked the joint venture agreement and invoked arbitration. McDonald’s has been pursuing arbitration against Bakshi in the london Court of International Arbitration. However, earlier in June, the National Company law Tribunal (NClT) reinstated Bakshi as Managing Director of CPRl.