With the closure of 84 outlets on Monday, over half of McDonald’s restaurants in North and East India have now downed shutters, which may put pressure on franchise partner Vikram Bakshi to sell out to the global burger giant.
Connaught Plaza Restaurants (CPRL), a 50:50 joint venture between Bakshi and McDonald’s, ran around 160 outlets. But a fallout between the company and McDonald’s supply chain partner Radhakrishna Foodland, due to alleged non-payment of dues by CPRL, has hit suppliers hard.
“We are now having to airlift supplies and more outlets are likely to get affected over the next few days,” Bakshi told TOI. “Radhakrishna Foodland has abruptly ended their services and the timing is a suspect because this is the peak season.”
CPRL was in constant dialogue with the promoters of Radhakrishna Foodland, Bakshi said, and the due of Rs 2 crore was not part of the regular monthly payments that were being made to the company. “They are holding back around Rs 10 crore of my stocks,” he said. “I was ready to pay Rs 50 lakh up front to resume dialogue.”
According to Shete, Bakshi had asked the logistics firm to pick up supplies from companies that were not approved by McDonald’s and as an official partner of the US burger chain, the company is not allowed to do it. “We declined to do it,” Shete said. With regards to the outstanding dues from CPRL, Shete said the Bakshi-led company’s volumes had fallen by half when it closed down several stores earlier this year.
As per the legal understanding with McDonald’s, if volumes go down, the cost to the logistics partner goes up. “As for the stocks that are lying with us, most of it has passed the expiry date because CPRL was not picking them up due to poor sales,” he said.
McDonald’s had terminated its franchise agreement with CPRL in August due to a long drawn legal battle with Bakshi, which began in 2008 when the fast-food giant wanted to buy out his stake in the company. It had offered $5-7 million for Bakshi’s stake, while Bakshi quoted $100 million after Grant Thornton valued CPRL at $331million.