Forty-three of the 55 McDonald’s outlets in Delhi are shutting down, media reports said on Thursday, blaming the tussle between the north Indian franchisee and the global food giant for the shock decision.
“The ‘eating house licenses’ of a number of McDonald’s restaurants in Delhi have expired. The board of Connaught Plaza Restaurants Private Limited (or “CPRL”, McDonald’s licensee in North and East India) is working to obtain the required licenses. Pending this, CPRL is temporarily suspending the operations of the affected restaurants,” McDonald’s India Pvt Ltd (MIPL) said in a statement.
Over reports saying the shutdown will result in a loss of 1,700 jobs, MIPL said, “We understand that CPRL is retaining the employees of affected restaurants and will pay them their salary during the period of suspension.”
According to reports, falling revenues, lack of investment and a legal battle over ownership of the fastfood chain led to the trouble.
“It’s unfortunate, but operation of 43 restaurants operated by CPRL has been temporarily suspended,” The Economic Times quoted Vikram Bakshi, former managing director of CPRL, as saying. The shutdown decision was taken during a board meeting via Skype on Wednesday morning, it said.
Connaught Plaza Restaurants Pvt Ltd (CPRL) is a 50:50 joint venture of its founder Vikram Bakshi and MIPL, that runs the fastfood chain in north and east India.
Trouble started in 2013 when McDonald’s India removed Bakshi as the managing director of the joint venture, alleging misconduct.
The JV had four members on board – Bakshi, his wife, and two representatives from the American company.
Bakshi challenged his removal in the company law board, initiating a long legal battle between the two parties over share and ownership of the company, hampering operations.
According to Business Standard, “…maintaining hygiene and store-level efficiency became a major headache since 2014 as indecisiveness hampered day-to-day operations.”
With falling revenues and sales, Domino’s in 2013 replaced McDonald’s as the largest quick-service restaurant (QSR) chain in the country. The number of stores opened in a single year also came down from 27 in 2012 to nine in 2014, according to the report.
“India continues to be an important market for McDonald’s and we are committed to working with CPRL to resolve the issue as soon as possible,” MIPL said in the statement..