McDonald’s Terminates Agreement with India Franchisee After Dispute

Chefs' Take: The price of an instantly recognizable brand anywhere in the world is severing ties — and rebuilding — after franchisees don't follow the terms of the contract.
— Kristen Hawley

McDonald’s Corp.’s battle with one of its two franchisees in India escalated after the U.S company moved to terminate an agreement involving more than a third of its restaurants in the world’s second-most populous nation.

The Indian unit of McDonald’s said in a statement on Monday it has ended the pact with Connaught Plaza Restaurants Pvt., a joint venture that operates the brand’s 169 outlets in northern and eastern parts of the country, after it breached terms relating to some restaurants. Connaught Plaza in a separate statement said it’s considering “appropriate legal remedies” in response.

The local partner “has failed to remedy the breaches, despite being provided with an opportunity to do so in accordance with the agreements,” McDonald’s India Pvt. said. “We understand that this action brings uncertainty for many.”

The development creates a challenge for McDonald’s, disrupting operations in one of the world’s biggest emerging markets. The company will need to rebuild its brand across half the country as it searches for another partner for northern and eastern India.

McDonald’s and Connaught Plaza have been at logger heads for the past few years and some of the joint venture’s restaurants were forced to suspend operations this year. An Indian court in July had reinstated Vikram Bakshi, the local partner, as the managing director of the joint venture after its board had removed him earlier.

The U.S. company has two business entities in India. Its second venture is Hardcastle Restaurants Pvt., which operates 261 McDonald’s outlets in the western and southern parts of the country.

©2017 Bloomberg L.P.

 

This article was written by P R Sanjai from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].

Photo credit: As many as 169 McDonald's restaurants in northern India may need a new owner. / Bloomberg