McDonald's to shut 169 outlets amid dispute with Vikram Bakshi co; 10,000 jobs may be lost
The move will further dent McDonald's share of India's booming quick service restaurants market, where it has already been losing ground to rivals like Domino's Pizza
Fast food chain McDonald's said on Monday it planned to shut all 169 of its restaurants in India's northern and eastern regions, escalating a dispute with its local partner and potentially putting thousands of workers out of jobs.
The US company said it was "compelled" to take the action because its partner Connaught Plaza Restaurants Pvt Ltd (CPRL) had breached the terms of their franchise agreements.
Vikram Bakshi, managing director of CPRL, told Reuters the decision came as a "big shock" and the company was studying all its legal options.
The move by McDonald's India follows a protracted legal dispute with CPRL that started in 2013, when McDonald's said Bakshi's term as managing director had ended - a decision Bakshi challenged in the courts.
"They fell out because McDonald’s thought that Mr Bakshi was involved in irregular siphoning activities, so they wanted him to go," said AS Chandiok, a lawyer representing Bakshi, who added that his client denied the allegations.
McDonald's did not comment on the court dispute in its statement on Monday, but said it would try to mitigate the impact on employees, suppliers and landlords affected by the closure of the outlets.
The decision will likely lead to thousands of job losses and further dent McDonald's share of India's booming quick service restaurants market, where it has already been losing ground to rivals like Domino's Pizza.
The north and east Indian outlets under the McDonalds-CPRL franchise employ 6,500 people directly and many more indirectly, said Madhurima Bakshi, a member of CPRL's board.
All those restaurants will have to stop using McDonald's name, trademarks, designs, branding, and recipes within 15 days of the termination notice, McDonald's said. It added, though, that it remained committed to northern and eastern India and had started looking for a new partner.
"It will take time to bring the current situation to a final resolution," McDonald's said.
A report in The Times of India estimates the job loss figures at 10,000. The report citing a senior McDonald's executive said each outlet employs around 40-50 directly. Apart from this there are others who are indirectly employed such as suppliers and farmers who produces tomatoes, onions, lettuce and ingredients for sauces, the report said.
(With inputs from Reuters)
On Tuesday, the NCLT had dismissed Vikram Bakshi's petition against cancellation of franchise licence agreement to CPRL, following which he moved an appeal before NCLAT.
This means the fate of 169 McDonald's stores in north and east India hangs by a thread as CPRL's licence to operate the outlets lapsed on 5 September
McDonald's India has terminated the franchise agreement for 169 fast-food outlets in north and east India run by Connaught Plaza Restaurant Ltd (CPRL) and said the outlets cannot use its brand for any operations