McDonald’s Franchise

Vikram Bakshi, the estranged partner of McDonald’s in India, has offered to buy the US food major’s 50 per cent equity stake in their joint venture Connaught Plaza Restaurants (which runs the fast food chain in north and east India) at its net asset value according to a report in franchise Business Standard. Bakshi’s lawyers proposed the deal before the Company Law Board recently.

Sources close to Bakshi say he plans not to continue with the McDonald’s brand, for which the company pays royalty, and, instead, run the chain on his own, under a different brand name. He could also tie up with other fast-service restaurants, many of which are already looking at entering the country.

Under the joint venture agreement, both parties have the right to offer to sell or buy each other’s entire stake, though the other side has to accept the offer. In 2008, McDonald’s had proposed Bakshi sell his stake to it for USD five million, later raised to USD seven million. However, Bakshi didn’t agree to sell at such a low valuation. An independent valuation of the business by Grant Thornton said the business was worth USD 331 million.

In case the offer is accepted this time, the company, which has about 200 stores, will have to be revalued again. “As this is an internal matter, we do not find it appropriate to comment,” said a spokesperson from McDonald’s.

On November 28, 2013, McDonald’s had terminated its joint venture agreement with Bakshi by sending a notice. It had also moved the London Court of International Arbitration (LCIA). According to sources, Bakshi has nominated former Delhi High Court judge J K Mehra to represent him before the court. Bakshi had sought a stay on McDonald’s move to approach LCIA from the Company Law Board, where the dispute is pending. However, the board said “there is no prohibition” against McDonald’s approaching LCIA.

Bakshi had approached the Company Law Board after McDonald’s, in a public notice dated August 30, 2013 said, “Vikram Bakshi has ceased to be the managing director of Connaught Plaza Restaurants, pursuant to the expiration of Bakshi’s term on July 17.”

Apart from its venture with Bakshi, McDonald’s has another partner in India — the Jatias of Hardcastle Restaurant. With them, it has a franchise business agreement for operations in west and south India.



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