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McDonald's ends agreement for 169 outlets over breach of contract

Company also bars franchise partner CPRL from using its name, system, trademark, design, and associated intellectual property, among other things

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Weeks after 43 outlets of fast food giant McDonald's were shut in the Capital, the McDonald's India has terminated the franchise agreement for all of its 169 outlets in north and east India, run by the Connaught Plaza Restaurant Limited (CPRL). The company has blamed breach of contract terms and non-payment of dues for the decision.

As per the latest development, the company has also barred CPRL, under which McDonald's estranged franchise partner in the region, Vikram Bakshi, holds 50 per cent stake, from using the brand. It implies that the CPRL can no longer use McDonald's name, system, trademark, design, and associated intellectual property, among other things.

The decision will affect thousands of workers at the McDonald's outlets. The company, however, has assured that it would give due consideration to lessening the impact on affected parties, such as employees, suppliers, and landlords, and is open to working with the CPRL to achieve these ends.

In an official statement, McDonald's Corporation Global Head of Corporate Relations, Foundational Markets, Ron Christianson, said: "The termination is essentially because of the CPRL's violation of certain obligations as part of the agreement, including a default of payment of royalty." He said the royalty was not paid for two years, even though the CPRL was given ample opportunity to rectify the defaults.

"Today, we have issued the CPRL board a notice of termination of the franchise agreement between McDonald's India Private Limited and the CPRL for 169 restaurants operated by the CPRL in north and east India," the fast food chain statement read.

Commenting on the termination notice, Bakshi said the decision was an open challenge to the National Company Law Tribunal (NCLT) judgment, which had directed the CPRL board to meet and discuss various issues.

"The timing of this notice is hugely suspect because it comes on the morning of the first board meeting scheduled by the administrator," Bakshi said. The administrator — a former judge of the Supreme Court of India — was appointed by the NCLT.

"This is a completely contemptuous, malafide, and yet another oppressive act indulged in by the McDonald's," Bakshi said, adding that the CPRL was considering appropriate legal remedies to counter the notice. — with PTI inputs.

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