Over 8000 Employees To Lose Job Immediately As McDonald's Shut 169 Outlets
Over 8,000 employees working with Indian arm of McDonald's Corp. are set to lose job immediately while the company announced to shut its 169 outlets in India.
After estranged partner Vikram Bakshi failed to win interim relief on a petition challenging the fast-food chain's termination of their franchise agreement, the company will shut outlets in northern and eastern India. American fast-food chain's Indian arm, McDonald's India Pvt. Ltd, announced its intention immediately after the National Company Law Appellate Tribunal (NCLAT) said it would hear Bakshi's interim plea along with the main appeal scheduled for hearing on 21 September.
McDonald's southern and western franchise partner, in an interview with this reporter in 2015, said it plans to hire 12,000 people in India while giving an estimate that each restaurant approximately requires around 40 to 50 people.
Going by the similar estimates, the company will let go over 8000 people by shutting 169 outlets. Also, over 3,000 workers working as suppliers and business associates would be impacted, analysts estimated.
According to experts, the move will significantly impact the brand image. "There is an impact for thousands of employees… there seems no direct and immediate resolution in sight. Something as direct as this impacts the brand trust on the brand directly and significantly. And since the principal driver of the brand choice in case of McDonald's is the child, if this habit gets broken, it is a difficult turf to get back," warns N Chandramouli, CEO, TRA, a brand intelligence and data insights company.
India has nearly a $ 20 billion eating out industry. There is no dearth of eating out choices for the consumer, with strong competition from international burger chains including Burger King, Jack In the Box and Carls Jr among the seven new entrants. Also, the QSR segment is competing with other international QSRs such as Taco Bell and Dominos.
On 21 August, McDonald's India terminated its franchise agreement with Connaught Plaza Restaurants Pvt. Ltd (CPRL) for all 169 McDonald's outlets in northern and eastern India, citing non-payment of royalties as the primary reason. Bakshi, the managing director of CPRL (a joint venture between him and McDonald's India), was supposed to shut the restaurants within 15 days of termination (by 6 September).
NCLAT will now hear the matter on 21 September, with the main appeal brought by McDonald's India against the NCLT's order of July reinstating Bakshi as managing director of CPRL. A separate appeal was also filed by Bakshi requesting a fair valuation of the fast-food chain's outlets in northern and eastern India.
