169 McDonald's stores in north and east to shut down
The immediate future of all 169 McDonald's stores in the north and east is in doubt. If things go bad, they might even shut down within a fortnight. The uncertainty comes after the American firm terminated its contract with Connaught Plaza Restaurants Ltd (CPRL) - both companies were in an equal joint venture. As a consequence, thousands could lose jobs or contracts.
The McDonald's-CPRL tiff started years ago
Trouble had been brewing in the McDonald's India Private Limited (MIPL)-CPRL deal since years. In 2013, it voted against the re-election of Vikram Bakshi, then CPRL MD. McDonald's cited financial irregularities as the reason. Later, Bakshi moved the Company Law Board, accusing MIPL of mismanagement and oppression. Last month, the National Company Law Tribunal reinstated Bakshi as CPRL MD.
McDonald's attributes termination to CPRL's 'breach' of terms
"We've been compelled to take this step because CPRL has materially breached terms of the respective agreements relating to the restaurants, and has failed to remedy the breaches despite being provided an opportunity to do so in accordance with the agreements," said a McDonald's statement.
Thousands of jobs in danger, but west and south unaffected
Now CPRL can't use any intellectual property of McDonald's. This leaves in the lurch all 169 McDonald's stores in the north and east, as well as the thousands of employees, vendors and landowners associated with them. However, those in the south and west won't be affected. There, the franchisee rights are owned by Westlife Development Limited through its subsidiary Hardcastle Restaurants Pvt. Ltd.
Is there any way out for the 169 stores?
McDonald's needs to find a new development license partner. However, it has only 15 days to do so according to the termination notice's terms. McDonald's said it is committed to the job and "is taking steps to do so".