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When the chips are down! McDonald's to shut entire chain of 169 fast-food outlets in north and east India after alleged breach of contract

McDonald's India has terminated the franchise agreement for the entire chain of 169 fast-food outlets in north and east India run by Vikram Bakshi-led Connaught Plaza Restaurant Ltd (CPRL), alleging breach of contract and default in payments.

The termination notice bars CPRL from using McDonalds's name, system, trademark, designs and its associated intellectual property at these outlets within 15 days.

McDonald's India said it was looking for a new partner to re-establish its business in the north and east of the country.

 

There is an immediate danger of thousands of staffers employed at these restaurants being rendered jobless as a result of the decision.

McDonald's, however, said a priority will be given to mitigate the impact on affected parties such as employees, suppliers and landlords and it is open to working with CPRL to achieve this.

The decision comes weeks after 43 outlets run by CPRL in the national capital were shut due to non-renewal of eating house licences.

The termination is essentially because of CPRL's violation of certain obligations as part of the agreement, including a default of payment of royalty to MIPL, McDonald's Corporation Global Head of Corporate Relations, Foundational Markets, Ron Christianson said.

He said it has been two years since the royalty had not been paid and CPRL has been provided with an opportunity to remedy those breaches but they have failed to do so.

'Today, we have issued the CPRL board a notice of termination of the franchise agreement between McDonald's India Pvt Ltd and CPRL for 169 McDonald's restaurants operated by CPRL in north and east India,' the fast food chain said in a statement.

'We have been compelled to take this step because CPRL has materially breached the terms of the respective franchise agreement relating to affected restaurants and has failed to remedy the breaches, despite being provided with an opportunity to do so in accordance with the agreements,' McDonald's India said.

Theclosures are a result of a long-running legal dispute between Connaught Plaza Restaurants Private Limited and McDonald's (pictured - Ronald McDonald in Bangalore)

Ayoung man walks past a closed McDonald's in India

Responding to the termination notice, Vikram Bakshi said the decision is an open challenge to the National Company Law Tribunal (NCLT) judgment, which had directed the CPRL board to meet to discuss various issues.

The timing of this notice is hugely suspect because it comes on the morning of the first board meeting, scheduled by the administrator appointed by the NCLT, Bakshi said.

'This is a completely contemptuous, mala fide and yet another oppressive act indulged in by McDonald's. CPRL is considering appropriate legal remedies that are available under law,' he added.

Theclosures come amid allegations of a breach of contract and default in payments

He further said one of the items on the agenda was to discuss the re-opening of the 43 restaurants whose operations lie currently suspended. McDonald's JV with Bakshi had run rough weather with a feud breaking out over the management of CPRL. 

Bakshi was ousted from the post of managing director of the joint venture company in 2013 but had recently won a favourable ruling from the NCLT. The legal battle is expected to escalate with the termination notice.

'We understand that this action brings uncertainty for many. As we proceed to exercise our legal and contractual rights consequent on termination, a priority will be to mitigate impact on affected parties such as employees, suppliers and landlords and we are open to working with CPRL to achieve this,' the McDonald's India statement said.

Source: dailymail

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