McDonalds India on Monday announced it had terminated its franchise agreement with Vikram Bakshi's Connaught Plaza Restaurants. The 169 restaurants operated by the latter will have to stop using the McDonlad's brand name within 15 days.
Connaught Plaza Restaurants Pvt Ltd (CPRL) runs McDonald's outlets in northern and eastern India. McDonald's India it was on the lookout for a new partner.
"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 Licenses," McDonald's India said in a statement.
On June 29, the company had temporarily suspended operations of more than 40 of its restaurants in Delhi after the 'Eating House Licences' of a number of outlets expired.
"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.
MIPL 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 announcement assumes significance after the National Company Law Tribunal (NCLT) on July 13 restored Vikram Bakshi as Managing Director of CPRL.
CPRL is a 50:50 joint venture (JV) between MIPL and Bakshi, who was removed as MD in August 2013. McDonald's India and Bakshi have for long been embroiled in a fight over the control of CPRL.
McDonald's India said the company will try and mitigate 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 impact on affected parties such as employees, suppliers and landlords and we are open to working with CPRL to achieve this," the statement said.
McDonald's India said it was scouting for a new partner to re-establish a profitable business in the north and east of the country.