Internal spat leads to closure of McDonald’s across east, north

McDonald's estranged joint venture partner Vikram Bakshi today said nearly all outlets of the fast-food chain in east India had been shut and several others in the north are on the verge of a closure due to discontinuation of supplies by its logistics partner.

A total of 84 outlets are reported to have been hit by the cut off in supplies by Radhakrishna Foodland, a move which is seen as a result of the ongoing spat between the fast food chain and Bakshi.

Connaught Plaza Restaurants (CPRL), a 50-50 joint venture between Bakshi and McDonald's India, ran around 160 outlets. But a falling out between the company and McDonald's supply chain partner Radhakrishna Foodland due to alleged non-payment of dues by CPRL has hit supplies hard.

"We now have to airlift supplies, and more outlets are likely to get affected over the next few days," Bakshi told The Times of India. "Radhakrishna Foodland has abruptly ended their services and the timing is a suspect because this is the peak season."

Bakshi told PTI that "Almost all the outlets in east India have been shut because of the move by logistics partner, and others (in north India) are also under pressure due to supply crunch," adding that over 80 outlets are suffering considering the limited stock each outlet has.

In a letter dated 20 December, Radhakrishna Foodland Pvt Ltd wrote to CPRL saying it is discontinuing the supply chain services due to reduction in volume and uncertainty of the future, as also non-payment of a certain additional amount.

The otherwise massive business in the festive season for McDonald's is set to see a huge blip which will hit the food chain's revenue.

"Our long standing logistics vendor Radhakrishna Foodland in collusion with McDonald's Corporation and their wholly-owned subsidiary McDonald's India Pvt Ltd ... has decided to hold back stock paid for approximately Rs10 crore by us," Bakshi said in a letter to the landlords and developers of his outlets.

He further wrote, "While the American company and its subsidiary, MIPL, may have with their usual mala fide and malicious actions managed to give CPRL a temporary business setback at the end of the year and during this high sale festive season, yet we have made and are making alternative arrangements and shall be back to serve our customers very soon."

However, Raju Shete, promoter of Radhakrishna Foodland, told TOI that the discontinuation of his company's services to CPRL was not abrupt. "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," he said. "I am not ready to fund the collateral damage between two battling partners with my own money."

According to Shete, Bakshi had asked the logistics firm to pick up supplies from companies that were not approved by McDonald's and as an official partner of the US burger chain, the company is not allowed to do it. "We declined to do it," Shete said.

With regard to the outstanding dues from CPRL, Shete said the Bakshi-led company's volumes had fallen by half when it closed down several stores earlier this year. As per the legal understanding with McDonald's, if volumes go down, the cost to the logistics partner goes up. "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.

Bakshi has been at loggerheads with the fast food chain over the management of CPRL after he was ousted from the post of managing director of the McDonald's franchisee in August 2013.

McDonald's had terminated its franchise agreement with CPRL in August due to a longdrawn legal battle with Bakshi, which began in 2008, when the fast-food giant wanted to buy out his stake in the company. It had offered $5-7 million for Bakshi's stake, while Bakshi demanded $100 million after Grant Thornton valued CPRL at $331million.

McDonalds's India had asked CPRL not to use its brand system, trademark, designs and its associated intellectual property, among other things.

Bakshi had moved the NCLT following termination of the licence by McDonald's India Pvt Ltd (MIPL).

When contacted, a McDonald's India spokesperson told PTI, "We were informed that their vendors have stopped delivering supplies ... this is between CPRL and their vendors, not MIPL.''