McDonald’s vendors fear loss of business

Suppliers and vendors to the McDonald’s outlets in the North and East are in the dark about the future of their agreements and contracts. With the American fast-food chain locked in a legal battle with its estranged Indian partner Vikram Bakshi, the vendors are not sure about the valdity of their contracts.

Sources said that these restaurants could see disruptions in supplies in the coming days, as McDonald’s could ask vendors to stop supply, as part of its strategy to enforce the termination of its franchise agreement with Connaught Plaza Restaurants Ltd. (CPRL).

“Suppliers and vendors have signed their agreements with McDonald’s and not with CPRL. The products that these suppliers and vendors make are proprietary to brand McDonald’s and they cannot be supplied to any other company. Hence, these restaurants may run out of stocks in the coming days as McDonald’s enforces the termination of its franchise agreement,” said a senior retail industry executive.

In an emailed response to BusinessLine on how the company will enforce the termination, Barry Sum, Director, Corporate Relations, Asia Foundational Markets, McDonald’s, said: “We won’t be able to discuss specific plans and courses of action, at present.”

Another supplier, who did not wish to be named, said that there had been no communication from the company thus far. “Our business has been impacted as the demand for supplies has come down. Also our concern is that our agreement is to supply products that are based on the global formulations and recipes of McDonald’s.”

According to the termination notice issued by McDonald’s India, CPRL was given time till September 6 to cease using the McDonald’s name, trademarks, branding, recipes and specifications and other associated intellectual property.

On Thursday, after the National Company Law Appellate Tribunal (NCLAT) hearing, McDonald’s stated that it would go ahead and enforce the termination of its franchise agreement and closure of 169 outlets in the North and East region.

However, Bakshi said that until the termination notice is discussed in a board meeting, CPRL will continue to run the outlets. CPRL is a 50:50 joint venture between McDonald’s and Bakshi. The partners have been mired in a legal tussle since 2013.

The next hearing of McDonald’s and Bakshi’s petitions at the appellate tribunal will take place on on September 21.