The move comes after things took an ugly turn between Connaught Plaza Restaurants Private Limited, the local joint venture between Vikram Bakshi and McDonald’s, and the fast food giant.
New Delhi: Global fast-food chain McDonald’s decided to shut down 43 of its 55 restaurants in Delhi on Thursday, June 29.
The move comes after things took an ugly turn between Connaught Plaza Restaurants Private Limited (CPRL), the 50:50 local joint venture between Vikram Bakshi and the US-headquartered McDonald’s (which operates the fast food chain in North and East India), and the fast food giant.
According to a statement issued by McDonald’s, CPRL may retain its employees and pay them during the period of suspension. “The eating house licenses of a number of McDonald’s restaurants in Delhi have expired. The board of CPRL is working to obtain the required licenses. Pending this, CPRL is temporarily suspending the operations of the affected restaurants. While there are on-going legal disputes, suspending operations of the restaurants is a collective decision of CPRL’s board of directors,” said McDonald’s India in a statement.
“India continues to be an important market for McDonald’s and we are committed to working with CPRL to resolve the issue as soon as possible. We understand that CPRL is retaining the employees of affected restaurants and will pay them their salary during the period of suspension. 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 India further added.
According to Economic Times, Bakshi said, “It’s unfortunate, but operation of 43 restaurants operated by CPRL has been temporarily suspended”.
Bakshi, who is the former managing director of CPRL, is still on the CPRL board along with his wife. McDonald’s has two representatives on the CPRL board. The decision to close down the outlets was taken during a board meeting via Skype on Wednesday morning, Economic Times reported.
McDonald’s has also been going through hygiene and quality issues since mid-2013.
The fast food chain came to liberalised India in 1995, in a joint venture with Bakshi, and started operating in North and East India. But in 2013, McDonald’s voted against the re-election of Bakshi as the managing director. Bakshi challenged the decision in the Company Law Board (CLB), Delhi, alleging mismanagement in McDonald’s operations and oppression under Sections 397 to 402 of the Companies Act, 1956. McDonald’s has since been pursuing arbitration against Bakshi in the London Court of International Arbitration, reported The Quint.
Brand strategist Harish Bijoor told Economic Times that unless McDonald’s sorts out its legal battle, things might worsen. “Every passing day is a slur on the front-end brand,” he said, adding that there is nothing really bigger than the brand.
The closure is expected to have an adverse impact on McDonald’s in the Indian market.