Local partner challenges McDonald’s decision to shut down 169 restaurants
Adispute between the fast-food chain McDonald’s and a local partner in India has been the latest high-profile case to illustrate how operating in India can be challenging for foreign firms.
McDonald’s India last week said that it would go ahead with plans to shut its total of 169 restaurants in the northern and eastern parts of India.
This came after its estranged partner Vikram Bakshi, the managing director of the franchise partner company Connaught Plaza Restaurant (CPRL), was unsuccessful in his petition for interim relief while challenging McDonald’s termination of their agreement.
The partner is challenging McDonald’s notice, however, and refusing to close down the stores.
The chain said that it was closing the restaurants because its partner CPRL had breached the conditions of their franchise agreement, including failure to pay royalties.
Under the notice, CPRL was supposed to shut all of the affected stores and stop using the McDonald’s trademark, branding and food items, within 15 days of August 21.
The row between the partners goes back several years.
The dispute first began in 2013, when McDonald’s demanded that Mr Bakshi be removed as the managing director of CPRL.
Mr Bakshi challenged the demand and he was eventually reinstated.
India’s National Company Law Appellate Tribunal (NCLAT) is due to hear the main appeal for the case on September 21.
“We will continue to take steps to exercise our legal and contractual rights and enforce the termination,” McDonald’s said.
“Following the NCLAT hearing, the termination notice remains effective as of September 6, which requires CPRL to cease the use of the McDonald’s system and its associated intellectual property.” Meanwhile, Mr Bakshi in a statement quoted by The Economic
Times, an Indian business newspaper, said the stores would remain open for now.
“Until a decision is taken by the board of CPRL, it is business as usual,” he said.
“The administrator shall be requested to call for a board meeting at the earliest so as to discuss the above.”
The dispute is expected to result in thousands of job losses.
McDonald’s has said that it wants to remain in the region and is looking for a new partner.