Asia Pacific

McDonald’s cut ties with India franchisee

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After a four-year legal dispute with long-time joint venture partner Vikram Bakshi, the QSR giant is ending its association with India-based franchisees CPRL, reports Emily Lewis

In 1996, McDonald’s brought the famous golden arches to the Indian market. Now, with 300 outlets open in India, the company has decided to end its relationship with one of its two main franchisees.

Connaught Plaza Restaurants Private Ltd. (CPRL) has operated McDonald’s restaurants located in North and East India for the past 20 years. Meanwhile, Hardcastle Restaurants Private Ltd., owned by entrepreneur Amit Jatia, runs the outlets in South and West India.

Past problems for McDonald’s India

As approximately 90% of McDonald’s outlets are owned and operated by independent holders globally, the fast food chain’s decision to hand over its brand to CPRL’s managing director, Vikram Bakshi, was not an unexpected move.

It was not until recent years that the 50:50 joint venture became an issue for McDonald’s India Private Ltd. (MIPL). 2013 saw McDonald’s announce the removal of Bakshi from the position of CPRL’s managing director. Following this decision, Bakshi filed a petition with the National Company Law Tribunal (previously the Company Law Board). McDonald’s has since retaliated by pursuing arbitration against the ex-managing director in the London Court of International Arbitration.

Last month, the National Company Law Tribunal finally ruled that all steps taken in the pursuance of non-election of Bakshi were unlawful, stating “The status of Mr Vikram Bakshi as managing director of CPRL is restored.”

This decision followed the sudden closure of 80% of McDonald’s outlets in Delhi in June 2016, subsequent to the expiration of mandatory regulatory health licences for the restaurants.

21/08/2017: issues come to a head

The problems of recent years for McDonald’s India Private Ltd. culminated yesterday, as the company announced the termination of its franchise agreement with CPRL for 169 restaurants in the North and East of India.

Stipulated as part of the termination is a 15-day grace period for CPRL, at the end of which no outlet involved in the joint venture is permitted to use any intellectual property of McDonald’s. That includes name, systems, trademark, designs, and additional areas.

While MIPL have stated that it is “committed to finding the right developmental licensee partner for north and east India”, if a new partner is not found within 15 days, the major foodservice chain will face temporary closure in this area of the country, potentially placing thousands of jobs on hold.

In a statement issued by MIPL, it explained, “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 and has failed to remedy the breaches, despite being provided with an opportunity to do so in accordance with the agreements.”

Emily Lewis