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169 McDonald’s stores have to close shutters in India

BI India Bureau | Sep 7, 2017, 11.27PM IST
MMcDonald's has banned its partner- Connaught Plaza Restaurants Ltd (CPRL) to use its brand name and trademark starting September 6, implying that 169 stores of the burger-and fries brand face closure across the entire north and east region from yesterday.

The closure of stores could have adverse impact on thousands of lives and businesses as this will cause widespread damage to the lives of over 10,000 Indians (directly and indirectly), the company, the suppliers and all business associates.

CPRL, the 50:50 joint venture between McDonald's and Vikram Bakshi, MD, CPRL operates McDonald's stores in north and east India. Relations between the two partners have been estranged for the last several years. On August 21, the US burger and fries chain terminated its agreement with CRPL, and asked the latter to stop using all branding and intellectual property of McDonald's within 15 days.

The impact

The potential closure impacts the quick service restaurant industry's largest brand, its over 7,000 employees, suppliers such as Vista Processed Foods and Schreiber Dynamix Dairies, besides multiple store owners. Of the 169 stores, only a handful were owned directly by Bakshi, while majority of the stores were under leases by different store owners. Of the 169 stores that are impacted, 43 are already closed for the last two months, on account of non-renewal of eating house licences by local authorities.

Bakshi had challenged McDonald's termination notice at the NCLT. He had also filed another plea against the US company, alleging that the latter continued to interfere in the operations of CPRL — the equal 50:50 joint venture between the two. The NCLT asked Bakshi to seek relief from the National Company Law Appellate Tribunal (NCLAT) which has refused interim relief forcing CPRL to close 169 outlets for atleast some time.

The joint venture between McDonald's and Bakshi first faced headwinds in 2013, with McDonald's accusing its partner of financial irregularities and removing him as managing director of CPRL. Bakshi was reinstated as MD of CPRL in July 2017 by the NCLT. McDonald's had said last month that it was compelled to terminate the agreement 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".

Image credits: Buzzfeed Video
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