Following the termination of the franchise agreement with Connaught Plaza Restaurants (CPRL), which will impact 169 quick service restaurant (QSR) outlets that the latter ran in north and east India, McDonald’s told FE that the company will “mitigate impact” on CPRL’s employees, suppliers and landlords, soothening the impact on nearly 10,000 direct and indirect jobs at stake. “We understand that this action brings uncertainty for CPRL’s employees. We are open to working with CPRL to mitigate impact on their employees, suppliers and landlords as we proceed to exercise our legal and contractual rights,” said a company spokesperson in an email response. The CPRL is a 50:50 joint venture between Vikram Bakshi and McDonald’s, which has been operating under strained relationship between the partners since August 2013. McDonald’s also admitted to “remain fully committed to the opportunity in North and East India” and pointed out it was “taking steps to find the right developmental licensee” for the geography in concern “as part of our effort to rebuild the brand”.
On Monday, the fast food major had terminated CPRL’s franchise agreement alleging breach of contract terms and payment default by the franchisee in north and east India. The move followed National Company Law Tribunal’s order last month to reinstate Bakshi as CPRL’s MD, a position he lost on August 30, 2013, when his tenure was not extended. “The termination of the franchise agreement was because of CPRL’s violation of certain essential obligations, including default in the payment of royalties to McDonald’s India,” the American fast food chain said, adding that the situation lasted almost two years during which McDonald’s India provided CPRL with an opportunity to remedy the breaches but CPRL failed to do so.
“They are fully aware of these essential terms in the franchise agreements, including the consequences of breach.” While reinstating Bakshi as MD of CPRL last month, NCLT had appointed former SC judge Justice GS Singhvi as administrator on the board of CPRL to sort out issues, including the re-opening of 43 restaurants whose operations have been suspended since 2013. The four-member board comprises Vikram Bakshi and Madhurima Bakshi from CPRL’s end, and two directors from McDonald’s India, Robert Larson and Aysel Melbye.
The termination of the franchise agreement came on Monday, when a board meeting of CPRL was scheduled which the nominee directors of McDonald’s had declined to attend. The meeting has now been deferred to August 29. Meanwhile, the Amit Jatia-owned Westlife Development that runs the McDonald’s franchise in west and south India through its wholly-owned subsidiary Hardcastle Restaurants (HRPL), is being seen by analysts as readying for pan-India operations, owing to a surge of consolidation the QSR space.