Abstract

The case discusses the dispute between US-based global fast food chain McDonald’s and one of its Indian joint venture partners, Connaught Plaza Restaurants (CPRL) led by Vikram Bakshi (Bakshi), which affected the fortunes of the fast food chain in the highly competitive Quick Service Restaurant (QSR) market in India. McDonald’s, which entered the country in 1996, operated through two master franchisees, one a 50-50 joint venture with Bakshi called CPRL covering the northern and eastern parts of the country, and another with Hardcastle Restaurants Pvt. Ltd (HRPL) owned by Amit Jatia, covering the southern and western parts. In 2008, after more than 15 years of smooth operations during which McDonald’s acquired a pan-India presence and became synonymous with fast food in the country, the partnership between Bakshi and McDonald’s turned sour after McDonald’s tried to buy out Bakshi’s 50% stake. McDonald’s contended that CPRL was not maintaining the required quality and had failed to pay royalties for two years. In 2013, Bakshi was ousted as the MD of CPRL, but he was reinstated in 2017 after the case was referred to the National Company Law Tribunal (NCLT). The tribunal also barred McDonald’s from interfering in CPRL’s operations. On August 21, 2017, McDonald’s terminated the franchise agreement with CPRL for 169 restaurants operating across northern and eastern India. Bakshi, however, continued to run his outlets as he had earlier. As the impasse continued, competitors started gaining ground in the lucrative Indian QSR market. McDonald’s posted a loss of Rs. 3.05 billion in the financial year ended December 2017. Moreover, the mass closure of the restaurants disappointed customers and affected the brand image of McDonald’s in the country. Going forward, analysts feared that McDonald’s could lose a long-term growth opportunity in India’s rapidly growing QSR market if it did not sort out its problems soon.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the various modes of entry into an international market and their relative pros and cons.
• Evaluate the franchising business model as an effective strategy for business development in foreign markets.
• Understand the relationship between a franchisor and franchisee, in light of the conflict between McDonald’s and CPRL.
• Analyze the impact of the crisis on McDonald’s brand image.
• Explore ways in which McDonald’s could tackle its franchise dispute and revive its brand image in India

Keywords

International Marketing; Modes of entry; Franchising; Franchise relationship; Joint Venture; International management; Conflict management; Business strategy; Operational Strategy; Brand Management; McDonald’s; Quick Service Restaurant; Retail; Service marketing; Emerging market