McDonald’s has been ruling the Indian market since 2 decades and for the first time, this burger and fries chain has published its profit during fiscal year-to-March 2018 in the middle of a long drawn legal dispute with one of the important licensee partners. The local body of the Chicago headquarters has published their net profit of Rs. 65.2 Lakhs during the fiscal year 17-18 which signifies that they experience a net loss of Rs. 305 crore a year before according to the latest filings of McDonald’s with the Register of Companies.
McDonald’s presently has two channel partners in India namely, The Connaught Plaza Restaurants or CPRL that handles The North & East Business and the Westlife Development which is the master franchisee looking after the Southern and Western markets of India. McDonald’s enter in India in the year 1996 and over the years the franchise has experienced a net loss of Rs. 421 crore in Indian Market.
McDonald’s India said in their latest regulatory filing that “The Company is not only been able to stem any further erosion of the net worth, but it has also been able to successfully reverse the trending erosion with their infusion of fresh capital in the market”. Most of the earning made by the franchise is through its royalty which grew by 8% valuing about Rs. 119.6 crore.
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In the last fiscal year, McDonald’s has noticed a strong revival, especially when the other quick-service restaurants in the Indian market have posted high same-store sales growth. This helped in increasing the surge in their discount is driven footfalls at the malls and other greater presence in new marketplaces across the nation said the official of McDonald’s. During the last fiscal year, McDonald’s has assigned shares worth Rs. 71 crore to its parent company and hence they enhanced their authorized capital by Rs. 50 crores to Rs. 458 crore.
In August 2018, McDonald’s has decided to terminate all its franchise arrangements in the favor of CPRL and also terminated the joint ventures. This has directed CPRL to withhold the usages of its brand system, designs, trademark, and associated intellectual property. According to the last filing of McDonald’s, “Investments in the licensee partner were significantly impaired, therefore the provision of Rs. 198.2 crore has been directly considered in the financial statement of McDonald’s for the diminution in value of the investments in the CPRL”.
Moreover, the Bakshi Vs. McDonald’s legal battle dates back to the August 2013 and in the battle, Bakshi was fired from the post of managing director of the joint venture. In between, McDonald’s India was escalated when Bakshi has challenged the removal at the Company Law Board where he accused McDonald’s India for mismanagement and oppression.
Overall, the report states that the eating out market in India which has been dominated by the unorganized players is expected to register an increase of $131 billion by the end of 2022 fiscal year. The complete sales of the quick-service restaurants are also estimated to increase by 9.2% and reach the sales of more than $21.6 billion by 2022, as per the report of Euromonitor Data.