India

169 restaurants in limbo as McDonald’s shutters turbulent franchise

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock

Related tags: Law

McDonald’s has severed its 22-year relationship with partner Vikram Bakshi, putting all its 169 restaurants in north and east India at risk of closure.

The American chain has taken all branding, trademark and marketing rights away from Connaught Plaza Restaurants (CPRL), its equally owned joint-venture vehicle, after its relationship with Bakshi became increasingly fraught. 

Closed
McDonald's store locator already reflects closures.

The move will potentially put 6,500 jobs in jeopardy.

In a statement, McDonald’s said it was now “committed to finding the right developmental licensee partner for north and east India​”. 

There has been speculation that the longtime franchisee of the chain’s west and south India region, Amit Jatia, will acquire the rights to the restaurants formerly controlled by CPRL.

The relationship between McDonald’s and CPRL came to a head last month after a Bakshi was reinstated by a tribunal to his former role of managing director of the joint-venture.

He had been removed from the post in 2013 after the American company alleged financial irregularities. 

Explaining why it ruled in favour of Bakshi, the National Company Law Tribunal called the action by McDonald’s “illegal, unlawful, unjust and malicious​”.

Undaunted, the fast-food chain said it was compelled to dissolve its partnership with CPRL, which it alleged had “materially breached the terms of the respective franchise agreements relating to the affected restaurants, and failed to remedy the breaches despite being provided with an opportunity to do so in accordance with the agreements​”. 

The Indian ex-partner has been given 15 days to end its use of McDonald’s processes and intellectual property.

It could take several months for the chain’s Hong Kong-based Asian operation to engage a partner, leaving stores and employees in limbo.

It will take time to bring the current situation to a final resolution​,” McDonald’s said in a statement.

However, we remain fully committed to the opportunity in the north and east of India, and are already looking at the necessary steps to rebuild the brand​.”

Bakshi has called the move “a direct affront on the Indian legal system and an open challenge to the judgement by the National Company Law Tribunal principal bench​”. 

He is said to be considering legal action against the company, whose action was “a completely contemptuous, mala fide and yet another oppressive act​,” according to Economic Times​.

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