McDonald’s writes to suppliers, CPRL's Vikram Bakshi calls it 'indirect pressurising'

NEW DELHI: Restaurant chain McDonald’s wrote to its suppliers on Monday evening, saying it has terminated its contract with Connaught Plaza Restaurants Ltd. (CPRL), the joint venture that operates the outlets in north and east India.

“As the master franchisor in India, earlier this week McDonald’s India Pvt Ltd. (MIPL) has 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,” a McDonald’s spokesperson said.

Vikram Bakshi, managing director of CPRL, said the suppliers were being “indirectly pressurised.” “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,” Bakshi said in an email response.

Bakshi failed to get interim relief from the National Company Law Appellate Tribunal on his plea against the termination of the franchise licence agreement by McDonald’s last month. This led McDonald’s to state that effective September 6, CPRL has to stop using the McDonald’s system and associated intellectual property. “We will continue to take steps to exercise our legal and contractual rights and enforce the termination,” McDonald’s had said.

However, many stores have been functioning even after the termination of the agreement. Suppliers to McDonald’s include Vista Processed Foods, Schreiber Dynamix Dairies and Mrs Bector Food Specialties.

“No supplier will want to suspend supplies for two reasons – it will be viewed as an act of collusion of theirs with McDonald’s against CPRL and is detrimental to their business if CPRL ceases to order from them. Half the volumes of their business are from CPRL,” Bakshi said. He added that the suppliers do not have agreements with MIPL and they deal only with CPRL while taking orders, raising invoices and receiving payments.

“MIPL is not permitted by law or by any authorisation from CPRL to discharge any action on behalf of CPRL,” Bakshi said. McDonald’s would need a board resolution to do that, he said.