Ownership battle in McDonald's takes toll on business

The company, which runs outlets in north and east India, has seen revenue growth fall to 6% in 2014-15 compared 29% in 2010-11

The ownership battle between Vikram Bakshi and fast-food major McDonald's for control of joint venture company Connaught Plaza Restaurants (CPRL) has taken its toll on the business.

The company, which runs McDonald's outlets in north and east India, has seen revenue growth fall to 6 per cent in 2014-15 compared 29 percent in 2010-11 as investment has come to a standstill. The slide being pronounced in the last two years. In 2014-15, CPRL posted Rs 645 crore revenue compared to Rs 609 crore in the previous year.

In 2013-14 too, revenue growth halved to eight per cent from 16 per cent in 2012-13. In 2012-13, CPRL generated Rs 562 crore in revenues and in the previous year it stood at Rs 490 crore. Data has been sourced from the industry.

Persons in the know said CRPL's revenue slide actually began earlier if the revenue growth rates of previous years were taken into account. From 27 per cent in 2011-12, revenue growth in 2012-13 was down to 16 per cent, the sharpest drop in five years.

Bakshi had dragged McDonald's to court in 2013 after the multinational company announced its Indian partner would cease to be the managing director of the equally owned joint venture. Bakshi had argued that McDonald's move to remove him was linked to its objective of buying his stake cheap. McDonald's denied these charges.

While Bakshi has indicated since that he is ready to settle the matter out of court, McDonald's seems to think otherwise. In a mail to Business Standard, a McDonald's spokesperson said, "There is a process under way for resolving this and we will let that take its course."

Bakshi, when contacted, said he had last managed to secure a loan for the business in 2012-13, also the year when the business last saw double-digit growth.

He claimed McDonald's had not invested any capital in the business over the last few years. "The battle (for ownership) is hurting the company's growth plans, leading to loss of market share," Bakshi said.

From 27 stores that were opened in 2012, the number whittled down to three in 2015. In between, CRPL opened 13 new stores in 2013 and nine stores in 2014, sources in the know said.

The CRPL board includes Bakshi, his wife and two McDonald's representatives. The equal representation has seen the Bakshis and McDonald's at loggerheads, notably, since the legal tussle began. Predictably, the poor condition of the business has resulted in attrition levels growing.

From around 12-14 per cent a few years ago, it is now in the region of around 30 per cent, persons in the know said. Bakshi, when quizzed on attrition levels, simply said talented people were leaving the company.