Fast-food behemoth McDonald’s announced on Monday that it was planning to shutter all of its 169 restaurants in the eastern and northern regions of India, which escalates further the dispute it is having with a local partner and possibly putting thousands of people out of work.
The company, based in U.S. state of Illinois, said it felt compelled to carry out its decision to shutter the restaurants due to Connaught Plaza Restaurants Limited (CPRL), its partner in India breaching terms of the franchise agreements signed with McDonald’s.
Vikram Bakshi, the CPRL managing director said that the decision by McDonald’s was a big shock to him and that the company was busy studying all the different legal options that it had.
The move that McDonald’s India decided to carry out follows the protracted legal battle it has had with CPRL that began in 2013. At that time, McDonald’s announced that the term as the managing director held by Bakshi ended, which was challenged in India’s courts by Bakshi.
A lawyer who represents Bakshi, said that the two parties had a falling out due to McDonald’s thinking Bakshi had been involved in siphoning activities of an irregular nature, so they wanted him out.
The lawyer, A.S. Chandiok, added that Bakshi has denied all of the allegations made by McDonald’s.
No comment was made by McDonald’s related to the dispute in court on Monday when it released its statement, but it did say it would attempt to mitigate any impact on its employees, landlords and suppliers that will be affected through the closing of its 169 restaurants.
The decision is likely to cause thousands of people to lose their jobs while further denting the share McDonald’s has in the booming market in India of quick-service restaurants. In India, McDonald’s has already started losing share to rivals such as Domino’s Pizza.
The outlets located in India’s north and east under the franchise agreement between McDonald’s and CPRL employ over 6,500 people while many others will be affected indirectly, said a member of the board for CPRL.
All the restaurants involved will have to stop the use of the name, designs, trademark, branding as well as recipes of McDonald’s within 15 days of the notice of termination, said officials at McDonald’s India.
The officials added that the fast-food giant remained committed to the north and east regions of India and had already started its search for a new partner in the two regions.