McDonald's, partner squabble: 43 outlets to shut down in Delhi; 1,700 employees set to lose jobs
McDonald's has said that licences of number of its restaurants operating in Delhi have expired
US-based fast food chain McDonald's has decided to shut down 43 out of 55 restaurants in Delhi. This move by the US company will likely render over 1,700 employees jobless, The Economic Times report said.
The move to shutdown the restaurants, which operates under Connaught Plaza Restaurants (CPRL), comes as relation between the two joint venture partners -- Vikram Bakshi and McDonald's, soured.
CPRL has the licence to operate in north and east India, while Westlife DevelopmentBSE, through subsidiary Hardcastle Restaurants (HRPL), owns the master rights for the west and south India operations of McDonald's and runs 242 restaurants.
However, McDonald's has said that licences of number of its restaurants operating in Delhi have expired, a PTI report says.
"It's unfortunate, but operation of 43 restaurants operated by CPRL has been temporarily suspended," the ET report said quoting Vikram Bakshi, former managing director of CPRL, which operates 168 restaurants.
The report further says that CRPL did not get the requisite regulatory health licences because of the persisting squabble between Bakshi and McDonald's.
With the lingering conflict between the two warring parties, CPRL's revenue growth declined to 6 percent in FY15 from 29 percent in 2010-11 after investments stagnated. In 2014-15, CPRL's revenue stood at Rs 645 crore compared to Rs 609 crore in the previous year, a Business Standard report said.
The restaurants also failed to maintain hygiene and store-level efficiency and that became a major headache since 2014. Indecisiveness between the warring partners also hampered the day-to-day operations, the BS report added. In fact, the number of new stores opened in 2012 was 27, which came down to meagre 3 in 2015.
Meanwhile, the Company Law Board is yet to pronounce its verdict in a case where Bakshi was removed from the post of managing director of CPRL in August 2013. McDonald's has been pursuing arbitration against Bakshi in the London Court of International Arbitration, the ET report said.
Experts fear the closure of restaurants in Delhi will further hurt the prospects of McDonald's which has seen its performance sliding in India, with pizza brand Domino's replacing the company from its number one position.
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