Home » Business » All about the war of words at McDonald's
The two are equal partners in Connaught Plaza Restaurants, which runs McDonald’s restaurants in the north and east of the country. McDonald’s has alleged that Mr Bakshi diverted money to his private companies and that’s why he has been removed as the company’s managing director.
Mr Bakshi has said that he has done no wrong and McDonald’s is using strong-arm tactics to buy him out.
The company had offered him $5 million for his 50 per cent stake in Connaught Plaza Restaurants, Mr Bakshi has said; when he declined, it is said to have raised the offer to $7 million.
Mr Bakshi, reportedly, will settle for nothing less than Rs 200 crore (over $30 million at the current exchange rate).
He has also alleged that McDonald’s is doing this in collusion with Amit Jatia’s Hardcastle Restaurants, which operates the fast-food chain in south and west of the country.
The matter is now with the Company Law Board.
McDonald’s started out in India in 1996 with two 50-50 joint ventures: Connaught Plaza Restaurants and Hardcastle.
(At that time, it was the first McDonald’s anywhere in the world without beef on its menu.)
In hindsight, it wasn’t the best possible entry strategy but McDonald’s was able to put together a working model.
The two companies would collaborate on marketing (single creative and media buying agency), menu and supply chain management.
The arrangement seemed to be working well.
There was no sign of any friction, at least not on the surface.
Then, a couple of years ago, Mr Jatia bought out the overseas partner and Hardcastle became a franchisee of McDonald’s.
Some months ago, the royalty paid by Hardcastle to McDonald’s was raised from three per cent of net sales to eight per cent.
This is amongst the highest royalty rates being paid by an Indian company to its overseas collaborator -- an issue that has been flagged by more than one investor protection group.
Now, there is discord in the other joint venture.
Is it possible that McDonald’s wants to turn Connaught Plaza Restaurants also into a franchisee?
If it can do that with Hardcastle, which runs 166 restaurants, why not with Connaught Plaza Restaurants, which operates 154 and is hence the smaller of the two?
However, amid all the name-calling, it seems unlikely that McDonald’s will sell out of Connaught Plaza Restaurants too and then make it a franchisee.
One possibility is that Mr Bakshi can sell out to McDonald’s, which will then run Connaught Plaza Restaurants.
Or else, McDonald’s can exit the venture and start
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