By Himani Gandhi
McDonald’s India has terminated the franchise agreement for 169
fast-food outlets in north and east India run by Connaught Plaza Restaurant Ltd
(CPRL) and has said the outlets cannot use its brand for any operations.
CPRL is led by Vikram Bakshi, the estranged partner of the
US-based food chain giant.
The decision comes weeks after 43 outlets run by CPRL in the
national capital were shut due to non-renewal of eating house licences by local
authorities.
The company is currently working on the terms to
mitigate the impact of the shutdown on all stakeholders including thousands of
employees across 169 restaurants. McDonald’s operations in west and south India
have not been affected as the master franchisee rights of the burger chain are
owned by a separate company, Westlife Development Ltd, through its unit
Hardcastle Restaurants Pvt. Ltd.
The decision could impact about 6,500 direct jobs
in India, and lead to the possible closure of McDonald’s restaurants in the
northern and eastern regions, at least temporarily. CPRL owned 169 outlets,
including 43 in and around Delhi that have already been shut
down.
The battle had not
only impacted profitability of CPRL, but also revenue growth, which fell to 6%
in 2014-15 from 29% four years earlier. The burger and fries chain said it was compelled to terminate the agreement
because “CPRL has materially breached the terms of the respective franchise agreements
relating to the affected restaurants, and has failed to remedy the breaches
despite being provided with an opportunity to do so in accordance with the
agreements”.
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