McDonald's 169 outlets face closure today; Vikram Bakshi to move NCLAT as 10,000 jobs hang in balance

As 169 McDonald's outlets in north and east India face closure from today, uncertainty looms large over 10,000 staff directly and indirectly employed at these outlets.

McDonald's India, which operates in the country through two franchisees, had terminated the agreement with Connaught Plaza Restaurants Ltd (CPRL), in which the fast food chain's estranged franchise partner Vikram Bakshi holds 50 percent stake. The termination notice period ended on 5 September, according to a report in The Economic Times.

McDonald's has alleged breach of contract terms and payment default by the operator of the franchise in north and east India.

 McDonalds 169 outlets face closure today; Vikram Bakshi to move NCLAT as 10,000 jobs hang in balance


The termination notice has barred CPRL from using McDonald's brand at any of the 169 outlets.

The ET report says, citing a McDonald's spokesperson, that the termination notice period ended on 5 September and CPRL cannot use its system and intellectual property anymore. "We are proceeding with exercising our legal and contractual rights," the spokesperson told the newspaper in an email.

Meanwhile, on Tuesday the National Company Law Tribunal (NCLT) dismissed a plea by Bakshi challenging the termination of franchise agreement, while at the same time issuing a show-cause notice to Mcdonald's Corporation over contempt petition by its estranged partner. Bakshi has told the ET newspaper that he would approach the National Company Appellate Tribunal (NCLAT) on Wednesday.

However, the report says, store owners such as DLF have served notice to CRPL to vacate their stores. “If the brand name can no longer be used in those stores, we will obviously be looking for new tenants. We can’t have a situation where stores in plum locations lie vacant,” said a senior official at DLF quoted in the report. The report also says suppliers are yet to hear from CRPL regarding the signed contracts.

While terminating the agreement with CPRL about two weeks back, McDonald's had said a priority will be given to mitigate the impact on affected parties such as employees, suppliers and landlords. It is also open to working with CPRL to achieve this.

NCLT had given time until 30 August for both Bakshi and McDonald's to sort out the matter amicably. Clearly, there was no progress on this front.

Bakshi had filed a contempt plea before the NCLT against termination of franchise license of 169 outlets in the north and east India last month by McDonald's.

He had also filed another plea against McDonald's Corporation alleging interference into the affairs of their 50:50 joint venture -- Connaught Plaza Restaurant Ltd (CPRL).

Bakshi has been at loggerheads with the fastfood chain over the management of CPRL after he was ousted from the post of Managing Director of the McDonald's franchisee in August 2013.

The decision to terminate the franchisee agreement comes weeks after 43 outlets run by CPRL in the national capital were shut due to a non-renewal of eating house licences in June.

"The termination is essentially because of CPRL's violation of certain obligations as part of the agreement, including a default of payment of royalty to MIPL," McDonald's Corporation Global Head of Corporate Relations, Foundational Markets, Ron Christianson had said explaining the reason behind the decision.

He said it has been two years since the royalty had not been paid and CPRL has been provided with an opportunity to remedy those breaches but they have failed to do so.

Meanwhile, Bakshi has maintained that the allegations were "completely contemptuous, malafide and yet another oppressive act indulged in by the McDonalds".

The popular fast food chain, which is known for graduating people from vada pao to a range of burgers, has seen its fortunes declining since the past few years over a tussle with Bakshi for the management of CPRL after he was ousted from the post of managing director of the joint venture company in 2013.

The US food giant has another franchise agreement with Hardcastle Restaurants Pvt Ltd, which operates 261 McDonalds outlets in western and southern India.

(With inputs from PTI)

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Updated Date: Sep 06, 2017 09:48:23 IST