New Delhi, Aug. 21: The Maharaja Mac - the beefless fast food staple that stands in for the Big Mac in India - has dumped its Indian partner and is looking for a new ally in the north and the east.
Which means that unless a deal is struck in 15 days or an alternative found, the desi Mac may go off the menu in cities like Delhi and Calcutta.
Blame it on a legal dust-up between McDonald's India Pvt Ltd and Vikram Bakshi, who had teamed up in March 1995 to bring the famous Golden Arches and their classic burger-and-fries option to India.
On Monday, US-based fast-food giant McDonald's terminated the franchise agreement with Connaught Plaza Restaurants Ltd (CPRL), which runs 169 outlets in the north and the east.
The iconic burger brand has asked franchisee CPRL to stop using the McDonald's brand, the Arches and other signages that form the intellectual property of the $24.6-billion company within 15 days.
McDonald's India said today it would be looking for a new partner to replace CPRL in the two regions.
"Today we have issued the CPRL board a notice of termination of the franchise agreements for 169 McDonald's restaurants operated by CPRL in north and east India. This includes all restaurants impacted by the recent failure to renew the Eating House Licences," McDonald's India said in a statement.
CPRL is a 50:50 joint venture between Bakshi and McDonald's India. The move by the US food firm to terminate the franchise comes within weeks of the National Company Law Tribunal restoring Bakshi to the position of managing director of CPRL on July 13.
In Calcutta, several developers of malls that house McDonald's restaurants said they had instructed their legal teams to pore over the contracts they had signed with CPRL to work out the implications of McDonald's termination notice.
"We let out the space for the McDonald's brand. If that does not remain, we'll have to terminate the contract," a mall developer said.
At least three malls in Calcutta have the American fast food chain outlet as an anchor tenant on the ground floor, occupying a prominent site within the property.
Builders fear that if the McDonald's tenancy ends, they could lose footfall. Most of the outlets started during 2008-10 when the relations between the joint venture partners were cordial.
McDonald's India and Bakshi have been embroiled in a fight for control of CPRL since 2011. McDonald's had accused Bakshi of pledging his 51,300 shares in CPRL with HDFC Bank while taking a loan for his hospitality venture in violation of the joint venture agreement.
Bakshi denied the pledge of shares to HDFC Bank and has been contesting McDonald's right to invoke a call option on his shares and thereby usurp control of CPRL.
The joint venture between Bakshi and McDonald's India was in tatters when Bakshi was ousted from his position as managing director of CPRL in 2013, with McDonald's citing alleged financial irregularities.
Soon after, Bakshi moved the Company Law Board (CLB) against the move while McDonald's moved the London Court of International Arbitration in response. McDonald's said it would appeal against the verdict of the National Company Law Tribunal (NCLT).
Bakshi said the decision was an open challenge to the NCLT judgment, which had directed the CPRL board to meet to discuss various issues. "The timing of this notice is hugely suspect because it comes on the morning of the first board meeting, scheduled by the administrator," he said.
"This is a completely contemptuous, mala fide and yet another oppressive act indulged in by McDonald's," he said, adding that CPRL was considering legal remedies .
He said that one of the items on the agenda was to discuss the reopening of the 43 restaurants in Delhi whose operations now lie suspended.
On June 29, the US firm had temporarily suspended the operations of more than 40 of its restaurants in Delhi after the expiry of the eating house licences of several outlets.
"As a result, CPRL is required to cease using the McDonald's system (including proprietary rights in McDonald's names, trademarks, designs, branding, operational and marketing practice and policies and food recipes) and its associated intellectual property in relation to these restaurants within 15 days of the termination notice," it said today.
McDonald's India said it was compelled to take this step because CPRL had materially breached the terms of the franchise agreements relating to the affected restaurants and had failed to remedy the breaches, despite being provided with an opportunity to do so.
The termination of agreement includes all restaurants impacted by the recent failure to renew the eating house licences, the company said.
"We have been compelled to take this step because CPRL has materially breached the terms of the respective franchise agreement relating to affected restaurants and has failed to remedy the breaches, despite being provided with an opportunity to do so in accordance with the agreements," McDonald's India said.
It added that the company would try and mitigate the impact on the employees in these restaurants.
"We understand that this action brings uncertainty for many. As we proceed to exercise our legal and contractual rights consequent on termination, a priority will be to mitigate (the) impact on affected parties such as employees, suppliers and landlords and we are open to working with CPRL to achieve this," the statement said.
