The burger chain will sell its business in Russia and said the “humanitarian crisis caused by the war in Ukraine and the resulting unpredictable operating environment have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable or consistent with McDonald’s values.”
In March, just after the war began, McDonald’s followed other Western companies in temporarily closing its restaurants in Russia. Once the sale is complete, the Russian restaurants will be “de-arched,” meaning the locations will no longer be allowed to use the McDonald’s name, logo, or menu. McDonald’s (MCD) said its employees will still be paid until the transaction closes and that “employees have future employment with each potential buyer.”
CEO Chris Kempczinski said he was proud of the more than 60,000 workers employed in Russia and said the decision was “extremely difficult”.
“However, we are committed to our global community and must remain steadfast in our values. And our commitment to our values means we can no longer let the arches shine there,” he said.
end of an era
The decision marks a remarkable end to McDonald’s three-decade relationship with Russia. McDonald’s opened the doors of its first restaurant in Moscow on January 31, 1990. More than 30,000 were served and Pushkin Square had to stay open hours later than planned because of the crowds.
His arrival in Moscow was about more than Big Macs and fries, noted Williams College Russia expert Darra Goldstein. It was the most prominent example of Soviet President Mikhail Gorbechev’s attempt to open his crumbling country to the outside world.
“There was a really visible crack in the Iron Curtain,” she previously said. “It was very symbolic of the changes that were taking place.” About two years later, the Soviet Union would collapse.
McDonald’s exit “represents a new isolationism in Russia, which must now look inward to attract investment and consumer brand development,” GlobalData chief executive Neil Saunders said in a note Monday. He added that other Western brands are taking a “principled stance on the concepts of freedom and democracy” and are reconsidering doing business in Russia.
A great price for leaving
McDonald’s will take a substantial write-down — between $1.2 billion and $1.4 billion — as a result of its Russia exit. Stocks were little changed in early trading.
“The fact that McDonald’s owns most of its restaurants in Russia means there is a well-funded business to sell,” Saunders said. “However, given the circumstances of the sale, the financial challenges faced by potential Russian buyers, and the fact that McDonald’s will not license its brand name or identity, the sale price is unlikely to be anywhere near its pre-invasion book value.” corresponds to the business.”
In its latest earnings report, McDonald’s said closing its restaurants in Russia cost it $127 million last quarter. Nearly $27 million came from staff costs, payments for rent, and supplies. The other $100 million came from food and other items requiring disposal.
McDonald’s had 847 restaurants in Russia at the end of last year, according to an investor document. Together with another 108 in Ukraine, they accounted for 9% of the company’s sales in 2021.
— Danielle Wiener-Bronner of CNN Business contributed to this report.