Competitors are rejoicing McDonald’s decision to close 169 outlets across north and east India in view of its legal battle with franchise partner, CPRL’s Vikram Bakshi.
Group Chairman and Founder of CybizCorp – which runs Carl’s Jr. in India – Sam Chopra told Indiaretailing, “The deadlock has positively impacted our business, especially with the recent introduction of our new range Super Taste Super Value under which all items start at Rs 39 and go up to Rs 99. This new launch has been beneficial for us considering McDonald’s always focused upon the kids and masses with lower income and purchasing power.”
Another burger joint, Dudleys, has introduced a low-end burger for the price sensitive consumer. The management says that with the closing of McDonald’s outlets, the brand is expecting more loyal customers.
Resonating the same, Founder and CEO, Yellow Tie Hospitality, Karan Tanna revealed, “In the locations where we are in close vicinity of McDonald’s, our sales have increased. There is obviously a spillover of consumers to our outlets. And with closure of McDonald’s we have also got access to their trained manpower. By recruiting them, we are helping saving jobs as well.”
Competitors like Carl’s Jr., Genuine Broaster Chicken, and Dudley’s are considering this a lucrative point in time to expand their businesses in areas where McDonald’s – by far the most popular burger chain in India – is shutting outlets.
“We are looking at opportunities to occupy the vacuum created by McDonald’s. Carl’s Jr. has an edge over others as landlords will also look for brands with good resilience and value, since they would want footfalls to continue at those specific locations,” said Chopra.
“McDonald’s had outlets at some iconic locations in Delhi and they could never have gone vacant had this incident not happened. This is good opportunity for mall operators, and landlords of high street stores to take advantage of their natural footfall and lease the vacated place to another restaurant franchise brand. They can earn an upside of rentals. We plan to approach such landlords to take over premises vacated by McDonald’s,” revealed Tanna.
Despite planning to take advantage of the situation, competitors do not deny the fact that McDonald’s has created a market for burgers in India.
“When McDonald’s entered India, the term burger was very new to Indians, who were familiar with Vada Pav. For a majority of Indians, burger was a foreign invention of a Vada Pav. McDonald’s was one of the first brands to introduce burgers in India as well as the concept of QSRs,” says Dudleys Founder, Ashish Bahukhandi.
The McDonald’s Story
On August 21, the popular burger chain that revolutionized the fast-food market in India terminated the franchise agreement for the outlets run by Connaught Plaza Restaurants Ltd (CPRL), alleging breach of contract terms and payment default, including royalty, for two years.
CPRL is a 50:50 joint venture between the US-based food chain and Bakshi, who was ousted as MD in 2013 due to disputes over management.
The National Company Law Appellate Tribunal (NCLAT) has asked the parties to consider settling their dispute among themselves and decide so by August 30, failing which the court will follow its own procedure.
As part of the termination, CPRL cannot use McDonald’s name, trademark and design, among others, after September 6.