BackMcDonald’s franchisee CPRL to challenge termination of pact
CPRL is planning to challenge the termination of franchise agreement of 169 restaurants by McDonald's
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New Delhi: Connaught Plaza Restaurants Pvt. Ltd (CPRL), the north and east India licensee of McDonald’s is planning to challenge in a court of law the termination of franchise agreement of 169 restaurants by the US-based burger chain.
The company said that termination of franchise pact is in conflict with the National Company Law Tribunal, or NCLT, order of July 2017 which states that McDonald’s Corp. is refrained from interfering with the smooth functioning of Connaught Plaza and all its 169 restaurants open in the assigned territory of north/east India.
“We are challenging the termination of the franchise agreement. We are preparing to file a suit in a few days. The termination is clearly meant to scuttle the judgment of the NCLT. It happened on the day of the first board meeting after the NCLT judgement. McDonald’s has complete disdain for our laws and policies," said Vikram Bakshi, managing director of CPRL.
CPRL is the local joint venture between Bakshi and McDonald’s India Pvt. Ltd (MIPL), the local unit of the American fast food chain. Earlier this week, MIPL had terminated its franchise agreement with CPRL citing non-payment of royalties as the primary reason.
However, Bakshi added that the two nominee directors of McDonald’s on the board of CPRL were aware that royalty money was being used to repay the bank loans. “As much as Rs46 crore out of Rs186 crore debt was repaid to the banks in two years. With this termination, the future of all employees, suppliers and vendors is in jeopardy," said Bakshi, adding that the CPRL, at present, has 6,500 employees across 169 restaurants.
When contacted for comments, an MIPL spokesperson said that the company will not comment on CPRL’s internal matters. “We want to reiterate that CPRL as the company with whom we signed our franchise agreements, is the franchisee of McDonald’s restaurants in North and East India and therefore has the responsibility to fulfill the contractual obligations with that agreement," said Barry Sum, director, corporate relations, Asia Foundational Markets at McDonald’s Corp.
The termination of franchise pact came almost two months after CPRL shut 43 of the 55 McDonald’s restaurants in Delhi following its failure to renew their licences, amid a legal battle between Bakshi and McDonald’s.
In 2013, McDonald’s voted against the re-election of Bakshi as managing director of CPRL, following which Bakshi challenged his removal at the Company Law Board (now the National Company Law Tribunal, or NCLT), accusing McDonald’s of mismanagement and oppression.
Later in 2013, McDonald’s revoked the joint venture agreement and invoked arbitration. McDonald’s has been pursuing arbitration against Bakshi in the London Court of International Arbitration. However, the NCLT reinstated Bakshi as managing director of CPRL earlier in July.
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