McAloo Tikki enters row as another Indian JV starts to fall down

By RJ Whitehead

- Last updated on GMT

McAloo Tikki enters row as another Indian JV starts to fall down

Related tags: Joint venture, India

The humble McAloo Tikki, McDonald’s' cheapest and most popular sandwich in India, is at the centre of a row between the multination’s regional office and one of its disgruntled joint-venture partners.

Vikram Bakshi, a director of Connaught Plaza Restaurants, which runs 154 outlets in northern and eastern India, contends that he and the other member of the joint-venture, Hardcastle Restaurants, should receive royalties from the McAloo Tikki when it is sold in other territories, such as in the Middle East and Southeast Asia.

Royalty charges

The Indian partners set up a research and development unit that devised the burger, which McDonald’s describes as “a combination of a potato and peas patty with special Indian spices coated with breadcrumbs, served with sweet tomato mayo, fresh onions, tomatoes in a regular bun​".

The McAloo Tikki is based on a traditional Indian street favourite and, with the Pizza McPuff, which was also developed in India, commands 60% of McDonald’s sales in India.

McDonald’s levies royalty charges on its local partners for selling its international products, so why shouldn’t they receive payments for their own developments, questioned Bakshi.

As one might expect, things are not rosy between Bakshi and McDonald’s, with the former having petitioned Indian’s Company Law Board after McDonald’s voted against reinstating him as managing director of Connaught Plaza in August. The chain accused Bakshi of not devoting enough attention to his role.

JVs in jeopardy

This is the latest case of an Indian partner falling out with an international foodservice or retail company. International companies require a local partner under foreign direct investment laws, but now as more of these joint-ventures mature, friction between the two sides appearing to be on the rise.

One high-profile fall-out has involved Di Bella, Australia’s fastest-growing coffee chain, and its Indian partner, Sachin Sabharwal, with a feud between the two surfacing within a year of the joint-venture launching.

"We repeatedly received complaints from suppliers that he [Sachin Sabharwal] hadn't cleared bills. There are criminal charges pertaining to cheating and rape against him in Mumbai,” said Phillip Di Bella, the company’s founder.

“Also, he had attempted to register completely unrelated Australian brands in India, in complete violation of the licence agreement the joint venture company [Di Bella India] had with Espresso."

Then, the Indian unit of Beam Global, the world's fourth-largest spirits maker, managing director Harish Moolchandani, along with other senior executives, was asked not to report to work, following allegations of financial irregularities last year. A new MD was appointed earlier this month.

And, of course, there was recently the well-publicised break-up of Bharti-Walmart, the retail joint-venture. However, changes to FDI rules will allow Wal-Mart to remain in India with its Best Price cash-and-carry chain.

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