McDonald’s store closures leaves key vendors, mall operators and land owners rattled

Fast-food giant McDonald’s decision to indefinitely close 169 stores across India’s north and east has rattled key vendors, mall operators, and land owners that have long-term leases and supply deals with the restaurant chain.

Key vendors include Vista Processed Foods, which supplies chicken, vegetable patties and fresh produce, Schreiber Dynamix Dairies that sells cheese, Mrs Bector Food Specialties that delivers buns and sauces, and Amrit Foods, which provides soft-serve and milk-shake mixes.Radhakrishna Foodland is McDonald’s logistics and distribution partner for the northern and eastern regions.

“We could be staring at heavy losses and would seek compensation which could run up to Rs 10 crore a month,” an official at a top supplier told ET.

“We have anyway been saddled with lower demand from the quick-service industry for the past two years. Besides, we haven’t increased prices. And now…. in their fight, we have to suffer since we need to compensate farm from whom we have been sourcing for years,” said a top official at another leading supplier.

Some mall owners said they are writing to joint venture company Connaught Plaza Restaurants Ltd (CPRL) to either be compensated the rentals for three months or according to contractual obligations, or be given clarity and assurances on re-opening of the shut outlets.

Stakeholders Seek Clarity Pushpa Bector, executive VP and Head of DLF Premium Malls, said: “We are seeking clarity Pushpa Bector, executive VP and Head of DLF Premium Malls, said: “We are seeking clarity on the situation from McDonald’s at the earliest. We cannot have McDonald’s store locations at our malls vacant. We are telling them that if there is no clarity, they need to allow us to look at other options in the stores.”
DLF Cyber Hub and Mega Mall food court, both in Gurgaon, are among the two posh DLF properties where McDonald’s has been running its stores.

On Monday, McDonald’s Corp announced snapping all ties with CPRL and took away all branding, trademark, design and marketing policy rights from the estranged partner Vikram Bakshi. McDonald’s said that CPRL is required to cease using the McDonald’s System within 15 days of the termination notice.

An average outlet of McDonald’s has more than 1,200 patrons every day and accounts for 5-6% of a well-run mall’s total traffic, said Jaspal Sabharwal, co-founder of food-centric aggregator TagTaste and a private equity veteran.

Of the 169 stores, very few are owned by Bakshi, while most are under leases done by CPRL.

‘Mitigating the Impact’ McDonald’s global head of corporate relations, foundational markets, Ron Christianson had saidMonday that the company’s priority will be to mitigate the impact on affected parties such as employees, suppliers and landlords, adding that the company is ‘open’ to working with CPRL to achieve this.

“We have approached CPRL officials to compensate on rentals for at least three months in case there is an abrupt closure within 15 days. A three-month notice period is part of the contract and they have to compensate us,” said a property owner who has leased out at least a couple of stores to CPRL.

McDonald’s Corp has already indicated that it will “take time to bring the current situation to a final resolution”.

 

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