x

Abu Dhabi, UAESunday 24 June 2018

Burger behemoth McDonald's at loggerheads with India partner

Refusal to shutdown stores despite company saying agreement has been terminated

McDonald's is embroiled in a dispute in the country. Tolga Akmen/AFP
McDonald's is embroiled in a dispute in the country. Tolga Akmen/AFP

A dispute between the fast-food chain McDonald's and a local partner in India has been the latest high-profile case to illustrate how operating in India can be challenging for foreign firms.

McDonald's India last week said that it would go ahead with plans to shut its total of 169 restaurants in the north and east of India.

This came after its estranged partner Vikram Bakshi, the managing director of the franchise partner, was unsuccessful in his petition for interim relief while challenging McDonald's termination of their agreement. The partner is challenging McDonald's notice, however, and refusing to close down the stores.

McDonald's last month announced that it planned to shut up shop in the northern and eastern parts of India, saying that it had terminated the franchise agreement.

The chain said that it was taking this action because its Indian partner, Connaught Plaza Restaurants (CPRL), had breached the conditions of their franchise agreement, including failure to pay royalties.

Under the notice, CPRL was supposed to shut all of the affected stores and stop using the McDonald's trademark, branding and food items, within 15 days of August 21.

_______________

Read more:

Coca-Cola losing its fizz in India

Take our quick 20-question quiz on May’s business news

_______________

The row goes back several years.

The dispute first began in 2013, when McDonald's demanded that Mr Bakshi be removed as the managing director of CPRL. Mr Bakshi challenged that and he was eventually reinstated.

India's National Company Law Appellate Tribunal (NCLAT) is due to hear the main appeal for the case on September 21.

“We will continue to take steps to exercise our legal and contractual rights and enforce the termination,” McDonald's said. “Following the NCLAT hearing, the termination notice remains effective as of September 6, which requires CPRL to cease the use of the McDonald's system and its associated intellectual property.”

Meanwhile, Mr Bakshi in a statement quoted by The Economic Times, an Indian business newspaper, said the stores would remain open for now.

“Until a decision is taken by the board of CPRL, it is business as usual,” he said. "The administrator shall be requested to call for a board meeting at the earliest so as to discuss the above.”

The dispute is expected to result in thousands of job losses.

McDonald's has said that it wants to remain in the region and is looking for a new partner.