43 McDonald's Delhi outlets to shut today, 1700 will lose jobs

NEW DELHI: In an unprecedented move, the infighting between Connaught Plaza Restaurants (CPRL), the 50:50 local joint venture between Vikram Bakshi and the US-headquartered McDonald’s that operates the fast food chain in north and east India, and the global burger giant took an ugly turn with the CPRL board deciding to shut down 43 out of 55 restaurants in Delhi from Thursday.

“It’s unfortunate, but operation of 43 restaurants operated by CPRL has been temporarily suspended,” said Vikram Bakshi, former managing director of CPRL, which operates 168 restaurants.

Bakshi is still on the CPRL board along with his wife. McDonald’s has two representatives on the CPRL board. The decision to close down the outlets was taken during a board meeting via Skype on Wednesday morning.

While the estranged joint venture partner declined to share reasons for closure, highly-placed sources disclosed that CPRL failed to get the mandatory regulatory health licences renewed because of the infighting between Bakshi and McDonald’s. The move, they point out, will render over 1,700 employees jobless.

Bakshi, who was dramatically ousted in August 2013 as managing director of CPRL, has been embroiled in a protracted legal fight with McDonald’s, dragging the world’s largest fast food chain to the Company Law Board (CLB), which is yet to announce its verdict. McDonald’s has been pursuing arbitration against Bakshi in the London Court of International Arbitration. Westlife Development Ltd, through subsidiary Hardcastle Restaurants Pvt. Ltd (HRPL), owns the master rights for the west and south India operations of McDonald's and runs 242 restaurants.

The closure, reckon marketing and branding experts, will hurt McDonald's, which has been sliding in India since it was dethroned by pizza brand Domino's from pole position in 2013 as the largest quick service restaurant (QSR) chain in the country.

“It’s a body blow for the brand,” said Ashita Aggarwal, head of marketing at SP Jain Institute of Management and Research.

It might well turn out to be precursor to the final nail in the coffin of the American fast food chain that made Indians graduate from roadside vada pavs to branded burgers, she adds.

Brand strategist Harish Bijoor contends that unless McDonald’s sorts out its legal battle, things might worsen. “Every passing day is a slur on the front-end brand,” he says, adding that there is nothing really bigger than the brand.