The fate of McDonald’s in India remains uncertain as the legal strife between the American fast food chain and its local franchise partner, Connaught Plaza Restaurants Ltd heads towards an incessant turmoil.
Vikram Bakshi, an estranged stakeholder in the joint venture between McDonald’s India Pvt. Ltd (MIPL) and Connaught Plaza Restaurants Ltd (CPRL) is set to move to the Delhi High Court over the ongoing tug-of-war. While Bakshi was asked to sell his stake in CRPL to the US fast food chain by the London arbitration court award, the 62-year old is now planning to challenge the decision in the Delhi High Court. The trouble started brewing in August when McDonald’s cancelled the franchise agreement for its 169 outlets in north and east of India alleging breach of contract terms and payment default, including non-payment of royalty for two years. McDonald’s has been pursuing arbitration against Vikram Bakshi in LCIA since 2013.
Termination of license would mean that CPRL is supposed to refrain from using the name, trademarks, designs, operational and marketing strategy and food recipes, effective September 6.
PTI reported, “The London Court of International Arbitration (LCIA) on September 12 asked Bakshi to sell his stake and called for the appointment of independent experts to determine a fair value for CPRL.”
As the embodiment of US’ fast food journey conveniently remains mum on the matter, the power tussle between MIPL and CPRL has been long ongoing with both parties making offers to buy the other out. In 2013, when the fast-food chain voted against the re-election of Bakshi as the managing director of CPRL, Bakshi challenged the move in the National Company Law Tribunal (NCLT). It was only later that year that McDonald’s retracted the joint venture agreement while citing arbitration. Troubles seemed to wear away when Bakshi was reinstated as managing director on July 13, 2017, by NCLT who directed McDonald’s Corp. to refrain from interfering in the ‘smooth’ functioning of CPRL. McDonald’s challenged the move by NCLT in the National Company Law Appellate Tribunal (NCLAT) which is still pending.
Smell foul play
Bakshi, managing director of CPRL, plans to move to the Delhi high court out of claim of unfair practice and license termination by McDonald’s. This decision comes after McDonald’s India approached Delhi high court to enforce the arbitration court award against Bakshi, following which the court had issued a notice to the latter and sought a reply within six weeks. The case awaits a hearing in the end of October.
Even though McDonald’s outlets in north and east India were supposed to close shutters by September 6, most of the outlets remain open and functioning. Vikram Bakshi recently told a daily, “We have spent over INR 150 million for maintaining the outlets in the last three months. The company has paid all the stakeholders. We have paid all the maintenance charges, rent and electricity bills. It is a matter of so many jobs at stake.”
An employee of the McDonald’s outlet in Paschim Vihar, West Delhi, stated, “Me and my colleagues, we are looking for jobs elsewhere. Even though the situation seems controlled, it’s just the calm before the storm. There is no surety. The power tussle is going to cost us our jobs and future and we need to be prepared for whatever the outcome be.”
McDonald’s has apparently instructed suppliers not to serve CPRL. With both parties fighting hard for justice, the US fast food chain is looking into other options. It is speculated that McDonald’s wants to partner up with its south and west franchise partner, Hardcastle Restaurants Private Ltd. (HRPL), headed by Amit Jatia, Jubilant Food Works, which runs the Domino’s Pizza and Dunkin’ Donuts franchises in India and Moon Beverages, authorised bottler of Coco-Cola in India, to replace CPRL.
McDonald’s has not been the poster child of innovation and food safety in the Indian food and beverages market. It has opened only 1 outlet in 2012 as opposed to 27 outlets in 2012. Reports by market research firm Kantar IMRB states that since McDonald’s stopped operations in Delhi, fast-food rival Subway has gained by 5 pc traffic while Kentucky Fried Chicken (KFC) by 2 pc. Overall share for McDonald’s declined from 9 pc in June to just 3 pc in July.
In terms of flexibility, it has not been experimental with its menu wherein its Western counterpart is launching new burgers every day in the face of tough competition from competitors like Burger King, KFC, Domino’s Pizza among others. For example, the McVegan burger is being tried in Tampere, Finland, from October 4 to November 21 to cater to the growing vegan population of the region. McDonald’s vegan rendition of their famous burger is made up of a soy-based patty nestled in a bun with all the standard fillings – a tomato, salad, pickles, and vegan McFeast sauce.
Innovation has not been the forte for McDonald’s in India, whose short-term launches like the Chilli Paneer Pockets and McDosa burger received more flaks than acclamation.
All has not gone down well, in terms of nutritional quality of the brand, though that is more worldwide than it is country specific. However, there were several complaints in the safety front with the consumer-complaints portal brimming with complaints that range from fried lizard in French fries to being served raw chicken.
Meanwhile, reports look positive for McDonald’s in the southern and western front of India, having recently introduced 12 new products across its food and beverages category. Managed by Hardcastle Restaurants Pvt Ltd (HRPL) that operates 261 McDonald’s outlets across 36 cities in south and west of India, the fast-food chain is introducing cuisines from across the world – a range of 12 new products with Italian, American and Indian roots.
Heading south for a burger, anyone?