Free Essays

McDonald’s franchise in India

McDonald’s started its franchise in India in 1995. McDonald’s signed a 25-year joint venture agreement with two partners named Amit Jatia and Vikram Bakshi. Vikram Bakshi has been the corporate face of McDonald’s in India last 18 years. Amit Jatia, vicechairman of Westlife Development Company that now controls Hardcastle, . Bakshi was given north and east, Jatia west and south part of india.

Both of them work completely in opposite direction. If Bakshi is all outrage, Jatia is all poise. If Bakshi speaks of McDonald’s with acrimony, Jatia speaks of amiability. If Bakshi accuses Jatia of instigating McDonald’s, Jatia politely declines comment. If Bakshi is counting the wealth he could lose because of the hostilities with McDonald’s,

McDonald does not like to operate their business by themselves. Its preferred mode risk and hassle free by given license to local partner by charging fee for its royalty. By this process McDonald’s makes more money. Now It has 34,000 outlets in 118 countries among them 80% are franchise.It entered developing countries like India in 1995, with two 50:50 joint ventures.It was not a hot market at the beginning. Both the partner had an experience in real estate. But they don’t have knowledge of business like strong Brand McDonald’s. With both, McDonald’s signed a 25-year joint venture agreement, which would run till 2020. After 15 years they found that there was no difference between the Bakshi and Jatia . In May 2010 McDonald’s decided to sell off its shares in the Jatia venture in favour of its Indian partner. But Bakshi was the exact opposite. On September 3 Bakshi has accused to McDonald’s of discriminatory and oppressive behavior to “fiscally disable us by hook or by crook, eventually forcibly causing us to sell out” and that it has “entered into a conspiracy” with Jatia. McDonald’s sold its 50% stake back to Jatia on May 2010 and JV moved to the American company’s preferred mode of franchise fee and royalty. On the Other hand McDonald offered Bokshi to buy him out for $5 million in August 2008 and $7 million in November 2008. To develop the franchise in India McDonald’s has decided to help Jatia that were not offerd by McDonals before .McDonald’s, funded more than Jatia and also help for Bank Loan. An Example given that in the Bakshi JV, of the Rs 206 crore capitals only Rs 15 crore came from Bakshi. Likewise, in
the Jatia venture, till May 2010, only Rs 16 crore of its total capital of Rs 124 crore came from Jatia. Now In India the growth potential is huge and also the contribution of Indian market to McDonald’s global revenue is minimal. It can be a strong business pathway for McDonald’s in the coming years