A couple of years ago, Michael Keaton wowed audiences everywhere with his portrayal of the man at the heart of modern fast food. In The Founder, Keaton brought McDonald’s mastermind and burger mogul Ray Kroc back to life with a bang, and told the story of how a small independent burger joint managed to conquer the world. Apart from shedding light on the tumultuous beginnings of one of the world’s biggest brands, The Founder also allowed audiences to understand the key concept that underpins McDonald’s success - franchising.
The franchise model is at the centre of everything that McDonald’s has accomplished. In its simplest terms, the concept grants investors the right to use the McDonald’s name, techniques and marketing to sell its product, in exchange for a series of fees that can cover everything from the cost of ingredients to purchasing the site. When it works well, it’s a relationship that can benefit everybody. As in any relationship however, there are times when partners don’t quite see eye-to-eye.
Twenty years ago, McDonald’s was just as ambitious and influential as it is today. But, despite running restaurants in 94 countries around the world, there was one economy that remained a Big Mac free zone. Despite being a massive growing economy of nearly one billion hungry people, McDonald’s were yet to crack India. That all changed on 13 October 1996.
When the first franchise was opened in New Delhi, it signalled the start of a fast food revolution across the country. Over the next two decades, almost 500 new restaurants would open in every major city, sparking a franchise boom that saw a lot of investors get very rich very quickly. For a while, all looked relatively rosey.
Unfortunately for the fast food giants, there was trouble in paradise. Behind the scenes, McDonald’s had been in a serious dispute with Connaught Plaza Restaurants Pvt. Ltd., one of their major investors and owners of 40 per cent of all Indian McDonald’s locations. Concerns over management, revenue generation and brand representation eventually caused McDonald’s to take legal action against their one time partners.
In August of 2017, 22 years after striking their original franchise deal, Connaught were ordered to stop using the McDonald’s brand, menu items and operating system in the restaurants. But, instead of obeying the order, they did what nobody expected. Connaught went rogue.
Despite haranguing from angry lawyers, the Indian insurgents have continued to sell Maharaja Macs, McAloo Tikki burgers and other items from McDonald’s Indian range. Lead revolutionary and Connaught managing director Vikram Bakshi told the Wall Street Journal in 2017 that he, “cannot allow a large organization, this [multinational] monster, whatever you want to call it, to truly belittle our contributions.” The result is that 140 rebel restaurants continue to run outside of McDonald’s control across the country.
Even though McDonald’s have made it clear that they feel the Connaught Restaurants are failing to adequately represent their interests, there is actually relatively little that they can do about it. Thanks to a ruling from an Indian tribunal, Mr Bakshi has a legal claim that the fast food giants should reinstate him as chief executive and not “interfere with the smooth running of the business”.
The court order is a serious blow to frustrated businesspeople back in America, leaving them with only one option. According to the franchise agreement, McDonald’s could instruct hired goons to forcibly remove their branding from the rebel restaurants. If left unchecked, this could lead to a Les Miserables style stand off, though involving considerably more food than the Victor Hugo original.
However intriguing the prospect of a barricade of baseball-cap wearing ex-McDonald’s workers hurling chicken nuggets at authorities may be, it seems that, for now at least, full on street violence is unlikely. According to one McDonald’s advisor, “we would not want to be in the situation of physically going and stopping [Bakshi].” Even rogue restaurants aren’t an excuse for all-out war.
Despite their defiance, the rebellion are not having it all their own way. Across many of the Connaught restaurants, supplies are running low, causing chaos amongst regular customers. Disputes with suppliers have caused big money makers like the McSpicy Chicken to sell out incredibly quickly, much to the frustration of restaurantgoers.
Other companies have cut ties completely with the rebels after being contacted directly by McDonald’s. For instance, Schreiber Dynamix Dairies Ltd. have stopped selling their products to Bikram’s restaurants, while the business responsible for building McFlurry machines has also elected to give them the cold shoulder. They might be McDonald’s in name, but Bikram’s empire is finding itself starved out by suppliers.
How the dispute will end remains a matter of intense debate. India is still a relatively untapped resource for McDonald’s, accounting for a fraction of its revenue despite having a fast food market worth nearly $20bn a year. For as long as they’re trying to put down this mutiny, McDonald’s will be unable to expand in the way that they would like. Ultimately, Vikram’s rebellion may prove to be futile. But even if they fail, they’ve shown that - in some cases at least - it’s perfectly possible to stand up to the big guy.