McDonald’s and CRPL’s Vikram Bakshi now spar over food suppliers
Connaught Plaza Restaurants’s (CRPL) Vikram Bakshi says McDonald’s India is indirectly pressurizing vendors to stop supplies to outlets
New Delhi: In order to enforce the closure of 169 restaurants, McDonald’s India Pvt. Ltd is impressing upon its vendors to stop transacting with Connaught Plaza Restaurants Pvt. Ltd (CPRL), the north and east India licencee of the American fast food chain.
CPRL is a joint venture between McDonald’s India (MIPL) and Vikram Bakshi.
In a letter to suppliers, the Indian unit of the US-based fast food chain said CPRL is no longer permitted to operate McDonald’s restaurants and that it must cease the use of McDonald’s intellectual property.
“As the master franchisor in India, earlier this week MIPL informed CPRL’s suppliers that we have terminated our franchise agreements with CPRL for all 169 restaurants in North and East India. As such, CPRL must cease the use of the McDonald’s system effective 6 September. CPRL is not permitted to operate McDonald’s restaurants,” said McDonald’s India, in an email response to Mint’s queries on asking vendors to cut back supplies to CPRL.
McDonald’s India, on 21 August, terminated its franchise agreement with CPRL. According to the termination notice, Bakshi was supposed to cease using McDonald’s name, trademarks, designs, branding, operational and marketing practice and policies and food recipes and specifications from 6 September.
“This will disrupt supplies to 169 restaurants as food recipes and food specifications are the intellectual property of McDonald’s India; CPRL is no longer authorized to use them. The agreements (of all suppliers) were with MIPL, not CPRL,” said a person familiar with the issue, on condition of anonymity.
In an emailed statement, Bakshi said: “We have been reliably informed by suppliers to CPRL that they have received letters from Robert Vee Chong, a director on the board of MIPL, indirectly pressurizing them to stop supplies to 169 restaurants run by CPRL. As is evident, they will stop at nothing to cripple CPRL...”
However, he added that the suppliers do not have agreements with MIPL. “They take their orders from CPRL, raise invoices to CPRL and receive payments from the latter. MIPL is not permitted by law or by any authorization from CPRL to discharge any action on behalf of CPRL. They would need a BoD (board of directors resolution) for that and they do not have any of that,” he said.
Key vendors of McDonald’s India include Vista Processed Foods Pvt. Ltd , which supplies chicken, vegetable patties and fresh produce; Schreiber Dynamix Dairies Ltd (cheese), Cremica Foods Industries Ltd (sauces), Mrs. Bector Food Specialties (buns) and Amrit Foods (dairy products). Radhakrishna Foodland (P) Ltd is the logistics and distribution partner of the company for North and East India.
Spokespersons for Amrit Foods, Schreiber Dynamix Dairies and Cremica Foods declined to comment. Bhupinder Singh, chief executive officer at Vista Processed Foods, did not respond to an emailed query. Calls and text messages to a spokesperson of Mrs. Bector Food Specialties went unanswered.
Bakshi said suspension of supplies will be detrimental to the business of vendors. “No supplier in his right mind will want to suspend supplies. Half the volumes of their business are from CPRL. That has a direct impact on pricing and purchase protocol for the entire business and their businesses will also go into a tailspin,” he said.
Until now, all McDonald’s outlets across north and east India have continued to operate, except 43 restaurants in Delhi that were shut in June due to CPRL’s failure to renew the licence. The closure of the restaurants would affect 6,500 McDonald’s employees.
“It’s not at all in dispute that the ownership of the brand and it’s IP (intellectual property) is of McDonald’s. Hence, the company can enforce termination. However, whether the termination is valid or not will be decided by court. Secondly, the licensee, as per law, can always claim damages for loss incurred if court finds the termination invalid,” said Vaibhav Vutts, founding partner at Vutts and Associates LLP, a Delhi-based boutique IP firm.
McDonald’s’ move comes days after Bakshi failed to win an interim relief on a plea challenging the fast-food chain’s termination of the franchise agreement.
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