CPRL shuts McDonald's outlets in east India on supply crunch

New Delhi: Nearly all McDonald's outlets in east India have been shut and the ones in the north are staring at closure due to supply crunch, said Vikram Bakshi of Connaught Plaza Restaurants Pvt. Ltd (CRPL), the estranged joint venture partner of McDonald's India Pvt Ltd, on Monday.

Eighty-four McDonald's outlets in east India have been shut by CPRL, the north and east India franchisee of the burger chain, as the logistics partner of the company, Radhakrishna Foodland discontinued supply chain services.

Radhakrishna Foodland manages the distribution network of CPRL in north and east India. CPRL is a joint venture between McDonald’s India (MIPL) and Vikram Bakshi, and operates 169 McDonald's restaurants across north and east India.

In a letter dated 20 December, Radhakrishna Foodland informed CPRL that due to uncertainty of the future and hence, complexity in operating, the company is discontinuing the supply chain services.

Mint has reviewed a copy of the letter.

"There is a non-availability of raw material, due to which we had to shut more than 80 restaurants in east India. The rest of the outlets are also under pressure. This is a malicious act; we were not even informed beforehand. Radhakrishna Foodland has even decided to hold back stock for approximately Rs10 crore paid by us," said Bakshi, managing director of CPRL.

With the discontinuation of these restaurants, CPRL has already incurred a loss of Rs1 crore and is expected to be hit further due to the ongoing festive season. "We are making alternative arrangements including air freighting the raw materials. We are trying our best to be back in business by the end of the year. We are not giving up," said Bakshi.

This comes in the backdrop of the ongoing legal battle between Bakshi and MIPL. McDonald’s India had 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 termination was challenged by Bakshi before the National Company Law Tribunal (NCLT) for being in contempt of the earlier NCLT order, which had asked McDonald's Corp. to refrain from interfering in the smooth functioning of CPRL.

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When contacted, a McDonald's India spokesperson said, "we were informed that their (CPRL) vendors have stopped delivering supplies.... This is between CPRL and their vendors, not MIPL."

"MIPL did not instruct any of CPRL’s vendors to stop delivery to CPRL.... As the franchisor in India, MIPL has only informed CPRL’s suppliers that we have terminated our franchise agreements with CPRL for all 169 restaurants in north and east India and that CPRL is not authorized to operate McDonald’s restaurants," the spokesperson added.

So far, Bakshi has continued to operate all restaurants. The closure of the restaurants would affect 6,500 McDonald’s employees.

McDonald’s India and Bakshi landed in court after the former voted against the re-election of Bakshi as MD of CPRL in 2013. Bakshi challenged his removal at the Company Law Board (now NCLT), accusing McDonald’s India of mismanagement and oppression. NCLT reinstated Bakshi as managing director on 13 July 2017.