McDonald terminates franchise in New Delhi, 84 outlets closed down

New Delhi: The fray between the burger giant McDonald and its Indian Franchise have reportedly hit the business really hard and now if this continues the Franchise partner will soon have to sell out to the global giant a report in TOI said.

Nearly 84 McD outlets were reportedly shut down in North and East India which is likely to put pressure on Vikram Bakshi, the franchise partner. The supply is hit too which is leading to shutdowns.

Connaught Plaza Restaurants (CPRL) ran 160 outlets of the burger giant in a 50:50 joint venture between Franchiser Bakshi and McDonald’s. But the tussle between the two, Bakshi and McD’s supply chain partner Radhakrishna Foodland had a huge impact on the supply which lead to shut down of outlets and now the supplies are likely to be airlifted. The reasons behind the fallout are alleged as non-payments of dues by CRPL.

“We are now having to airlift supplies and more outlets are likely to get affected over the next few days,” Bakshi told TOI. “Radhakrishna Foodland has abruptly ended their services and the timing is a suspect because this is the peak season.”

Bakshi said the CRPL due of Rs 2 crores was not a part of company’s regular monthly payment. He said “I was ready to pay Rs 50 lakh up front to resume dialogue,” adding that, “They are holding back around Rs 10 crore of my stocks,” he said.

However, the other side, Radhakrishna Foodland Promoter Raju Shete told TOI that fallout was not abrupt. He said, “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” he added.

Shete says as a US burger Chain’s official partner the company is not allowed to pick supplies that are not approved by McDonald which Bakshi insists on. He said, “We declined to do it.”

He added that Bakshi’s company CPRL has lost half of the company’s volume had dropped by half and as per the leading understanding with McDonald, the cost to logistics partner goes up if volume goes down. “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,” he said.

The growing modernization and adaption of this American eating, McDonald was willing to provide the Indians a customized America, which offered pork free and beef free products in its first restaurant opened in 1996 in Basant Lok in Delhi.

Now with this long drawn tussle between the two companies, McDonald is accusing CRPL of breach of contract and payment defaults. All outlets in North and East India will now shut down after it has terminated its franchise agreement with CRPL in August due wo the long drawn legal battle with Bakshi which began in 2008, ET reports.

This tussle between the two companies have delivered a fatal blow to McDonald since customers have been reportedly finding body parts, insects, foreign objects in the food served at the outlet. Though the company can survive the ups and downs in the business but can not afford brand erosion.
This has surely paved a way for other competitors like Subway, Burger King and KFC who have gained customers after McDonald’s closed down its outlets in Delh, according to a report by Kantar IMRB-Crownit.