Fast food chain McDonald's India today said that it has terminated the franchise agreement for 169 fast-food outlets in North and East India run by Connaught Plaza Restaurant Ltd or CPRL.
McDonald's India had a 50:50 joint venture with CPRL, a company led by Vikram Bakshi. CPRL was the master franchisee for McDonald's India in North and East India. The decision comes weeks after 43 outlets run by CPRL in the national capital were shut due to non-renewal of eating house licenses by local authorities.
The development could not only wipe out the burger and fries chain, at least temporarily across half the country, but also puts a question mark on thousands of jobs of employees and contracts of suppliers running into crores.
CPRL will not be allowed use of any intellectual properties of McDonald’s at the 169 outlets across North and East India within 15 days of the termination notice, a statement issued by McDonald’s said. The operational licenses of all stores was with CPRL. In its statement, McDonald’s said it would find a new licensee partner for its outlets in the two regions.
McDonald's outlets will remain open in south and west India, where it uses a different franchise operator. McDonald’s said it is working on terms to mitigate impact on affected parties including employees, suppliers and landlords.
"We have been compelled to take this step because CPRL has materially breached the terms of the respective franchise agreements relating to the affected restaurants," the company said in a statement.
The fast food restaurant market in India is worth some $1.5 billion and growing at around 15 percent a year, according to Delhi-based consulting firm Technopak.
With a population of 1.25 billion, more and more of whom have the money to eat out, India is an attractive market for foreign fast-food firms.
But foreign operators must have a local partner to operate and the process can be highly bureaucratic, with restaurants needing an average of 50 licences to operate.
Company chief Vikram Bakshi told the news agency PTI that CPRL was considering what legal recourse was available.
"This is a completely contemptuous, malafide and yet another oppressive act indulged in by the McDonald's," Bakshi was quoted as saying.
The equal joint venture between Bakshi and McDonald's India found itself in tatters when CPRL managing director Bakshi was ousted from his post in 2013, with McDonald’s citing alleged financial irregularities. Soon after, Bakshi moved Company Law Board (CLB) against the move, and McDonald’s moved the London Court of International Arbitration in response. Bakshi was reinstated as MD of CPRL last month by the National Company Law Tribunal (NCLT).