McD faces $105 million lawsuit

He also added that as a majority shareholder in BNR, McDonald's should shoulder the responsibility for the mismanagement. "They appointed all the key people in the management, this is their responsibility," he said. "They have experience running businesses all over the world. It's almost unbelievable that such mismanagement could occur. The 2007 financial report clearly shows the company suffered Rp 100 million in losses."

The Jakarta Post
June 10, 2009

McD faces $105 million lawsuit

jakartapost_logo.jpg

Lawyers for Bambang Rachmadi, the local partner of US fast-food giant McDonald's for the past 18 years, said Tuesday he was seeking US$105.5 million in damages for alleged mismanagement in his joint venture with the company.

Bambang claims that mismanagement was the main factor behind last week's sale of all McDonald's restaurants under the joint venture, PT Bina Nusa Rama (BNR), to PT Rekso Nasional Food (RNF).

BNR is jointly owned by Bambang and the investment arm of McDonald's, International Development Services (IDS), in a 10:90 split.

"According to the 2007 financial report, the company had total debts of $150 million," Tri Adhyaksa, spokesman for Bambang's legal team, told The Jakarta Post.

"On the other hand, the sale of assets only generated $20 million. So the company now still has roughly about $130 million in debt."

Tri said Bambang was entirely against the sale of assets as it would cripple the company's ability to pay back its loan to parent company McDonald's.

"Bambang was entirely left out of the sale of assets to the third party. And now BNR has no source of income as all of its assets have been sold," he said.

The requested compensation, Tri said, was demanded to protect Bambang from existing liabilities currently faced by BNR, considering his obligation as a shareholder.

He also added that as a majority shareholder in BNR, McDonald's should shoulder the responsibility for the mismanagement.

"They appointed all the key people in the management, this is their responsibility," he said.

"They have experience running businesses all over the world. It's almost unbelievable that such mismanagement could occur. The 2007 financial report clearly shows the company suffered Rp 100 million in losses."

The BNR management has not yet responded to Bambang's claims. However, BNR spokeswoman Dian Supolo said earlier that Bambang's grievances were unfounded and that all McDonald's restaurants would remain open as usual.

Despite facing a lawsuit filed last month at the South Jakarta District Court, BNR pressed ahead on June 3 with the sale of assets to RNF, the producer of the country's biggest-selling soft drink, Teh Botol Sosro.

In line with the sale of assets, McDonald's also terminated BNR's franchise permit and transferred it to RNF. The transfer, however, does not affect Bambang's ownership in BNR and 13 other McDonald's restaurants registered in his name.

Government regulations state a transfer of a license to another franchisee can be made only after the franchiser secures a settlement with the previous license holder.

The "clean break" settlement must be carried within six months of the franchise termination.

The court held the first hearing in the civil lawsuit on May 19 and will hold the next hearing in August, because of the time needed to summon McDonald's representatives in the United States.

McDonald's opened in Indonesia in February 1991 with its first restaurant located at the Sarinah department store in Central Jakarta, and has since expanded the business to 110 restaurants in the country.

The company, renowned for its Western food such as hamburgers and fries, has also adapted its menus to include various local tastes such as rice and fried chicken.

According to 2008 data, McDonald's is the second-biggest global market shareholder in fast food after KFC.

http://www.thejakartapost.com/news/2009/06/10/mcd-faces-105-million-lawsuit.html


Brought to you by WikidFranchise.org

Risks: Competence, Lawsuits, individual, Termination of franchisee, single, Indonesia, 20090610 McD faces

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License