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The RP-Sanjiv Goenka Group and Moon Beverages, which is Coca-Cola’s largest bottling partner, have started discussions with McDonald’s to take the place of Bakshi’s Connaught Plaza Restaurants (CPRL), said three officials aware of the developments. CPRL runs 165 McDonald’s restaurants in the north and east.
“Negotiations with potential partners are on and would be long-drawn since the deal will also involve complexities of long-term leases that CPRL had inked. Many of the real estate deals will have to be reset in sync with current rates,” said one official.
“The search for a developmental licensee is in progress. However, we do not currently have any updates to share,” said Barry Sum, director, corporate relations Asia-Pacific, McDonald’s.
Sanjiv Goenka, chairman of the retail-to-power RP-Sanjiv Goenka Group, was not available for comment.
Sanjeev Agarwal, chairman of Moon Beverages, declined to comment.
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There is speculation that Amit Jatia-led Hardcastle Restaurants, the operator of McDonald’s outlets in south and west India, may seek to run the burgers-and-fries business nationally, said one of the officials.
“The matter is between CPRL and McDonald’s. We remain focused on and committed to serving the market in the south and west region,” a spokesperson for Hardcastle said. Others are also said to be in talks with McDonald’s, the three officials said.
ET could not independently confirm the names of the other potential partners. McDonald’s and Bakshi-led CPRL told the National Company Law Appellate Tribunal earlier this week that they were working on an out-of-court settlement.
The tribunal directed them to file an affidavit and the terms of the settlement on May 13. The legal battle has been on for almost six years.
Industry experts said an association with McDonald’s would be an asset, given the brand’s timeless draw. “For prospective, new buyers of this business and McDonald’s Corporation, the end of this crisis is an excellent opportunity to reset their growth levers,” said Jaspal Sabharwal, cofounder of online food product review platform TagTaste.
McDonald’s posted a net profit of Rs 65.21 lakh — its first profit — in 2017-18 against a net loss of.`305 crore a year ago, according to filings with the Registrar of Companies. “The company has not only been able to stem any further erosion of its net worth but has also been able to successfully reverse the trend of erosion through infusion of fresh capital,” McDonald’s said in the filings.
“Brands like McDonald’s do not disappear overnight,” said TagTaste’s Sabharwal, who is a former private equity professional. “But sometimes, when conditions change, they react too fast and often end up undermining their own consumers.
McDonald’s consumers have stood by them through these years of crises; many other brands in a similar situation would have gone down under.”
According to a Euromonitor report, the eatingout market in India is forecast to reach $131 billion by 2022, with overall sales of quick service restaurants estimated to grow 9.2% to reach $21.6 billion. The report said that western fast foods is only 1.3% of the overall eating-out market, but will grow the fastest, 13.4%, to reach $1.8 billion in 2022.
THE BITE FIGHT
The McDonald’s-Bakshi 50:50 joint venture was inked in 1995 for outlets in the north and east through the franchise route. It first got into trouble in 2013, when Bakshi was ousted as managing director of the joint venture. Bakshi challenged his removal at the Company Law Board (now National Company Law Tribunal), accusing McDonald’s India of “mismanagement and oppression.” He was reinstated as managing director of CPRL by the tribunal, following which McDonald’s approached the appellate tribunal and sought arbitration.
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