McDonald’s, the global fast food chain, saw a major setback when 41 of its 55 restaurants in Delhi were shut down for non-renewal of license on Thursday, 29 June, 2017.
The Connaught Plaza Restaurants Pvt Ltd (CPRL, the local joint venture between Vikram Bakshi, former managing director of CPRL, and McDonald’s India), the north and east India licensee of McDonald’s, is working towards obtaining the required licenses which had expired resulting in the closure of 41 outlets. CRPL is responsible for the operation of more than 165 McDonald’s restaurants.
There have been reports which claimed that the 1,700 employees employed in the outlets which have been shut down will lose their jobs.
McDonald’s India Pvt Ltd (MIPL) spokesperson Barry Sum said that the talk of employees becoming jobless is erroneous.
The employees of the outlets, which have been temporarily shut down, need not worry because they will be retained and will be paid their due salaries during the period that the restaurants remain closed.
Bakshi, a member of the board of CRPL, also assured the employees and said, “As this is a temporary shutdown, all employees working in these restaurants shall be retained.”
The entire scenario of the shutdown of the McDonald’s outlets may be an outcome of the legal battle between Vikram Bakshi of CRPL, the estranged joint venture partner, and McDonald’s India, because of which health clearances for the Delhi outlets were not renewed. While McDonald’s voted against the re-election of Bakshi as the managing director of CPRL in 2013, Bakshi challenged his removal in the Company Law Board (CLB), accusing McDonald’s of mismanagement and oppression. Since then McDonald’s had revoked the joint venture agreement and invoked arbitration against Bakshi in the London Court of International Arbitration.
However, McDonald’s India issued a statement saying, “While there are on-going legal disputes, suspending the operations of the restaurants is a collective decision of the CPRL Board of Directors.”
McDonald’s competes with other fast food chains in India including Pizza Hut, Domino’s Pizza, KFC and Subway, and hopes that this temporary closure will not affect the brand’s goodwill and popularity in the long run, as the incident has not happened because of a transgression of a promise made to a consumer.
McDonald’s entered the Indian market under the partnership of Amit and Vikram Bakshi in 1995. However, over the years the relationship between Bakshi, the corporate face of McDonald’s, and the American counterpart, Jatia, has soured, resulting in Bakshi speaking of McDonald’s with acrimony and accusing Jatia of instigating McDonald’s.
It remains to be seen what will happen to the 27.5 billion dollar American hamburger and fast food company, one of the first global restaurant chains established in India, that prides itself in churning out the best burgers and fries with immaculate consistency.