169 McDonald’s outlets face closure over dispute with franchisee

American fast-food chain McDonald's has said that Connaught Plaza Restaurants Ltd (CPRL) will not be authorised to use its brand name and trademark as of today, which means that 169 stores of the burger brand across the entire north and east region face immediate closure.

''The termination notice period ends on 5 September. Therefore, CPRL is no longer authorised to use the McDonald's system and its intellectual property. It means they need to stop using the McDonald's names, trademarks, designs, branding, operational and marketing practice and policies, and food recipes and specifications. We are proceeding with exercising our legal and contractual rights," a McDonald's India spokesperson said in an emailed response to The Economic Times.

The National Company Law Tribunal (NCLT) on Tuesday dismissed a plea by CPRL managing director Vikram Bakshi challenging the termination of the franchise agreement by McDonald's.

The matter pertains to a long-drawn dispute between Vikram Bakshi and McDonald's India, following the former's ouster from the post of managing director of the joint venture company. The NCLT bench had asked McDonald's not to intervene in operations of CPRL. However, CPRL turned defunct after McDonald's last month terminated the franchise licensing agreement with it.

The dispute that came out in open in September 2013 following Bakshi's ouster by his American partner has recently again gained steam. The fate of 169 restaurants is in limbo as the last date of termination period ended on Tuesday.

Bakshi told Business Standard that to take a final call, the CPRL board will meet this morning under the chairmanship of former judge G S Singhvi, whom the NCLT appointed as an administrator.

Bakshi did not comment specifically on whether the stores would remain shut from today. "As of now, all I am saying is that we will be approaching the national company law appellate tribunal on Wednesday," he told The Economic Times.

He said the closure of stores would have adverse impact on thousands of lives and businesses. "This will cause widespread damage to the lives of over 10,000 Indians (directly and indirectly), the company, the suppliers and all business associates," he said.

CPRL, the 50:50 joint venture between McDonald's and Bakshi, operates McDonald's stores in north and east India. Relations between the two partners have been estranged for the last several years. On 21 August, the US burger and fries chain terminated its agreement with CRPL, and asked the latter to stop using all branding and intellectual property of McDonald's within 15 days.

Meanwhile, large store owners of McDonald's outlets, including real estate major DLF, said they have served notices to CPRL to vacate the stores, and are looking for new tenants. "If the brand name can no longer be used in those stores, we will obviously be looking for new tenants. We can't have a situation where stores in plum locations lie vacant," said senior official at DLF told ET.

A top official at a leading supplier, requesting not to be named, told the paper there was no communication yet from CPRL on the status of their contract. "We are in the dark and have to wait and watch what happens next. The loss is entirely ours," he said.

The potential closure impacts the quick service restaurant industry's largest brand, its over 7,000 employees, suppliers such as Vista Processed Foods and Schreiber Dynamix Dairies, and multiple store owners.

Of the 169 stores, only a handful were owned directly by Bakshi, while majority of the stores were under lease by different store owners. Of the 169 stores that are impacted, 43 are already closed for the last two months, on account of non-renewal of eating house licences by local authorities.