Vikram Bakshi, former managing director and a key shareholder of Connaught Plaza Restaurants Ltd (CPRL), the master franchisee for McDonald’s chain in the north and east regions in the country, has submitted a petition to the company law board (CLB) against the American fast food chain.
The petition alleges that McDonald’s is trying to take over the control of the equal equity joint venture CPRL in a coercive manner, according to media reports. Bakshi has demanded CLB to allow him to have exclusive management and control of the company.
This follows a public notice by McDonald’s, the world’s top fast food chain by revenues, two weeks ago which said Bakshi is no longer heading the firm. Bakshi’s term as managing director in the firm expired on July 17, 2013. Now the firm is run by the board, which includes Bakshi besides other representatives of McDonald’s. Bakshi had said he is looking at a legal recourse.
The Economic Times said in a separate report that in his petition Bakshi has claimed consulting firm Grant Thornton had pegged the enterprise value of CPRL at $331.3 million five years ago. Excluding debt at that time, the valuation of the company was around $303 million back then. As against this McDonald’s has offered to buy out Bakshi’s stake in CPRL for just around $5 million which was later raised to $7 million.
McDonald’s operates in India through two master franchisees which handle particular geographies—CPRL for the north and east region (McDonald’s N & E) and Hardcastle Restaurants Pvt Ltd (HRPL), which became a subsidiary of public listed company Westlife Development, for the south and west region (McDonald’s W & S). The latter became a full franchisee after the local partner Jatias bought out McDonald’s stake in the venture two years ago.
McDonald’s operates around 319 stores in the country of which 166 are run by Jatias and the remaining 153 are under CPRL.
As reported first by VCCircle, in the last two years, HRPL under Jatias has been growing faster and performing better than Bakshi-led CPRL. Sales of McDonalds W & S grew 45 per cent to Rs 544 crore in FY12, overtaking McDonald’s N & E for the first time. Although latest financials for McDonald’s N & E are not available, they are estimated to be less than its peer as its store count remained lower last fiscal.
Interestingly, McDonald’s W & S started outperforming after the Indian partners bought out McDonald’s stake and are now running it purely as a franchisee as against CPRL which is a franchisee as well as a joint venture with McDonald’s. Westlife, which derives almost its entire business from McDonald’s W &S, has a market value of over Rs 5,000 crore.
(Edited by Joby Puthuparampil Johnson)