84 McDonald’s Outlets Shut Shop in North, East India
The recent closure of McDonald's outlets is a result of discontinuation of supplies from a vendor.
Over 80 McDonald’s outlets were closed down in North and East India following a rift with a supply chain partner. The fast food chain in the two Indian regions is run by Connaught Plaza Restaurants (CPRL), a 50:50 joint venture between franchise partner Vikram Bakshi and McDonald’s.
The American company terminated its contract with Bakshi on Sept. 4 following a prolonged legal battle, prior to which it was announced that 169 outlets in North and East India would be shut down by the end of this year.
The recent setback that Bakshi faces is the withdrawal of supplies by the McDonald’s supply chain partner, Radhakrishna Foodland, over alleged non-payment of dues by CPRL.
“We are now having to airlift supplies and more outlets are likely to get affected over the next few days,” Bakshi told the Times of India. “Radhakrishna Foodland has abruptly ended their services and the timing is a suspect because this is the peak season.”
He added: “They are holding back around Rs 10 crore of my stocks,” and claimed that he was ready to pay Rs 50 lakh up front to resume dialogue.
Meanwhile, Raju Shete, the promoter of Radhakrishna Foodland, told the publication that the discontinuation of his company’s services to CPRL was not abrupt. “We had written three letters to CPRL and followed it up with several meetings with Mr Bakshi, as even our regular payments were not being made and CPRL’s dues were ballooning. I am not ready to fund the collateral damage between two battling partners with my own money.”
The pending dues of Rs 2 crore, Bakshi said, were not part of the monthly payments to Radhakrishna Foodland.
Shete has accused Bakshi of directing him to use other suppliers not approved by McDonald’s. “As for the stocks that are lying with us, most of it has passed the expiry date because CPRL was not picking them up due to poor sales,” Shete said.
Meanwhile, McDonald’s India (MIPL) responded to Bakshi’s accusation that MIPL had instructed vendors to stop the supply, saying that they were informed that CPRL vendors have stopped delivering supplies, according to livemint.com. The company said: “This is between CPRL and their vendors, not MIPL. MIPL did not instruct any of CPRL’s vendors to stop delivery to CPRL…. As the franchisor in India, MIPL has only informed CPRL’s suppliers that we have terminated our franchise agreements with CPRL for all 169 restaurants in north and east India and that CPRL is not authorized to operate McDonald’s restaurants.”
The closure of the outlets will harm more than 5,000 employees, since each outlet employs 40-60 workers, excluding corporate employees, suppliers, including farmers, according to a source quoted by the Times of India.
CPRL ran around 160 outlets starting in 1996, of which 43 were shut in July over non-payment of dues. McDonald’s and Bakshi have been battling it out legally since 2008 when the American firm wanted to buy his shares but Bakshi quoted a higher amount than they wanted to pay.
Bakshi was initially accused of benefiting through other business interests as managing director of the fast-food chain in India. He was ousted from the post in August 2013 and later reinstated by the National Company Law Tribunal (NCLT) in June 2017.
In August 2017, McDonald’s issued a notice saying that CPRL has 15 days to cease using the burger chain’s brand name, trademarks, designs, branding, operational and marketing practice, and food recipes in India. McDonald’s said it would look for other business partners to expand its business in North and East India after the two-decade long association broke down. However, CPRL had been running the operation after the NCLT intervened.