A franchisee dispute in India will result in 169 McDonald’s closures and potentially thousands of jobs lost as the fast food chain takes action against a partner it said breached terms of contract and defaulted on payments.
McDonald’s announced Monday it will shutter all of its units in the northern and eastern regions of India following a protracted legal dispute with Connaught Plaza Restaurants Pvt Ltd (CPRL). The issue stems back to 2013, when McDonald’s said the term of Vikram Bakshi, CPRL’s managing director, ended. Bakshi challenged the decision in court. McDonald’s reportedly believed he was involved in “irregular siphoning activities,” according to a lawyer representing Bakshi and told to Reuters. He denied the allegations.
"We have been compelled to take this step because CPRL has materially breached the terms of the respective franchise agreements relating to the affected restaurants," McDonald’s India said in a statement.
In July, an Indian tribunal restored Bakshi as managing director and ordered McDonald’s to pay him $15,590.
McDonald’s chose not to comment on the court dispute Monday, but did note it would try to lessen the affect on employees, suppliers, and landlords. The two outlets of McDonald’s-CPRL employ 6,500 people directly and more indirectly, CPRL member Madhurima Bakshi told Reuters. Bakshi said the decision was a “big shock,” according to Reuters, and is currently studying his company’s legal options.
The restaurants have 15 days from the termination notice to stop using McDonald’s name, branding, and recipes. The chain also said it will start looking for a new partner to serve the northern and eastern regions.
The Times of India reports that the fast food market in India is worth roughly $1.5 billion and growing about 15 percent a year. At 1.25 billion, India is the second-most populous nation in the world.
McDonald’s second partner, Hardcastle Restaurants Pvt., operates 261 restaurants in the western and southern parts of India.