McDonald’s writes to vendors on nixed deal

Meenakshi Verma Ambwani New Delhi | Updated on January 10, 2018

A view of a McDonald's outlet   -  BL

Estranged partner Vikram Bakshi calls it ‘indirect pressure’ to end supplies to Connaught Plaza Restaurants

The ongoing battle between McDonald’s India and its estranged Indian partner Vikram Bakshi took a new turn with the American burger chain shooting off formal letters to its suppliers informing them about its decision to terminate its franchise agreement with Connaught Plaza Restaurants (CPRL).

Bakshi sees the McDonald’s move to enforce the termination as an indirect pressure to turn off supplies to restaurants in the North and East being run by CPRL, the joint venture between McDonald’s India and Bakshi.

Replying to BusinessLine queries on email, a spokesperson for McDonald’s India Pvt Ltd (MIPL) said: “As the master franchisor in India, earlier this week MIPL informed CPRL’s suppliers that we have terminated our franchise agreements with CPRL for all 169 restaurants in North and East India. As such, CPRL must cease the use of the McDonald’s System effective September 6. CPRL is not permitted to operate McDonald’s restaurants.”

In a four-page statement, Bakshi said: “We have been reliably informed by suppliers to CPRL that they have received letters from Robert Vee Chong, a Director on the board of MIPL, indirectly pressurising them to stop supplies to the 169 restaurants run by CPRL. As is evident, they will stop at nothing to cripple CPRL, even if such action is an affront to the final judgment of the NCLT of July 13.”

Stating that suppliers do not have agreements with McDonald’s India and that they take orders from, and raise invoices on, CPRL, Bakshi added: “MIPL is not permitted by law or by any authorisation from CPRL to discharge any action on behalf of CPRL. They would need a Board of Directors Resolution for that and do not have any such (authorisation).”

He went on to say that “no supplier in his right mind will want to suspend supplies for two reasons — it will be viewed as an act of collusion with MIPL against CPRL and it’s detrimental to their business if CPRL ceases to order from them. Half the volumes of their business are from CPRL. That has a direct impact on the pricing and purchase protocol for the entire business and their businesses will also go into a tailspin.”

Bakshi feared that such actions would have direct and indirect impact on the livelihood of employees, suppliers and landlords among others.

Both McDonald’s and Bakshi’s appeals are scheduled to be heard by the National Company Law Appellate Tribunal on September 21.

Published on September 12, 2017

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