McDonald’s, the world’s leading food service retailer with more than 31,000 restaurants in 119 countries serving more than 50 million customers each day had entered into the Indian Markets way back in the year 1996 and since then it has accumulated a net loss of Rs 421 cr.
Celebrating over 12 years of leadership in foodservice retailing in India, McDonald’s now has a network of over 160 restaurants across the country.
The USP of McDonald’s is Quality, Service, Cleanliness & Value for money which means they focus on providing the customers with high-quality products, served quickly with a smile, in a clean and pleasant environment at an affordable price. In line with its respect for local culture, India is the first country in the world where McDonald’s does not offer any beef or pork items. McDonald’s has also re-engineered its operations to address the special requirements of vegetarians
But shockingly, McDonald’s, which is known to provide more than affordable eatables to customers, failed to make any profits until the year 2017 which is nearly two decades since starting wherein it reported a net profit of 65.2 lakhs.
However, in 2013 it got embroiled in a legal battle with CPRL, owned by its India partner Vikram Bakshi, and has impacted its financial performance over the years. While McDonald’s launched in India as a joint venture with CRPL, it reportedly expelled Bakshi, the then Managing Director of CRPL, discontinuing its franchise agreement for its 169 outlets, resulting in a legal battle between the two.
The National Company Law Tribunal later reinstated him and also refrained McDonald’s from interfering in the functioning of CPRL besides appointing an administrator to oversee the smooth functioning of CPRL.
Finally, in an out-of-court settlement that ended a six-year-long dispute, McDonald’s India announced on May 10, 2019 that it had bought out Vikram Bakshi’s 50 percent stake in the joint venture. CPRL is now wholly owned by McDonald’s India which, in the months following the buyout, has focused on reviewing the 160-plus outlets in the regions and getting many of the closed units up and functioning again. It is also actively looking for a business partner, or development license, for the northern and eastern regions
According to some analysts, mass closure of the restaurants disappointed customers and affected McDonald’s brand image in the country. In 2016, there were several instances of foreign objects, such as worms, fungus, and fried lizards reportedly being found in the McDonald’s menu at some outlets in northern and eastern India. Moreover, the closure of the restaurants affected about 6,500 McDonald’s employees in northern and eastern India, besides indirectly impacting 3,500 people working as suppliers and business associates, said analysts
The uncertainty hanging over the McDonald’s franchise in India had helped its competitors in many ways. Rivals such as Domino’s, Subway, and KFC quickly gained market share by offering exciting meal offers. According to market research firm Kantar IMRB, since the closure of the McDonald’s outlets in Delhi, Subway and KFC had gained 5 percent and 2 percent market share respectively.
The dispute also impacted the market share of McDonald’s in India. The fast-food chain’s overall market share dropped from 9 percent in June 2017 to 3 percent in July 2017. The expansion was hit as McDonald’s opened just one outlet in 2017 compared to 27 outlets in 2012.
It becomes really very shocking for people to know that a company so popular in the fast-food industry earns a profit after 22 years in the market. Should we learn from their perseverance and patience? The company has stated that it has now managed to grow out of its loss-making phase and been able to stem the erosion of its profits. The legal issue with CPRL is stated to be solved and the McDonald’s promises to serve the customers with the same fundamentals on which this reputed platform was formed.