July 4, 2022

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McDonald's is leaving Russia entirely

McDonald’s is leaving Russia entirely

The burger chain will sell its Russia business, saying that “the humanitarian crisis caused by the war in Ukraine, and an accelerated and unpredictable operating environment, have led McDonald’s to conclude that continued business ownership in Russia is no longer viable, and is no longer consistent with its values.” McDonald’s”.

In March, shortly after the start of the war, McDonald’s followed other Western companies and temporarily closed Its restaurants are in Russia.
Once the sale is completed, Russian restaurants will be “de-Arched,” meaning that sites will no longer be allowed to use McDonald’s name, logo or menu. McDonald’s (MCD) She said her employees will continue to be paid until the deal closes and that “employees have future jobs with any potential buyer.”

CEO Chris Kempczynski said he was proud of the more than 60,000 workers employed in Russia, and said the decision was “extremely difficult”.

“However, we have a commitment to our global community and must remain steadfast in our values. Our commitment to our values ​​means that we can no longer keep the arcs shining there,” he said.

the end of the era

The decision ends McDonald’s relationship with Russia, which lasted three decades. McDonald’s opened the doors of its first restaurant in Moscow on January 31, 1990. More than 30,000 restaurants were served and the Pushkin Square site had to remain open hours later than planned due to overcrowding.

Dara Goldstein, a Russia expert at Williams College, noted that her arrival in Moscow was more than a Big Mac and fries. This was the most striking example of Soviet President Mikhail Gorbychev’s attempt to open up his fallen country to the outside world.

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“There was an obvious crack in the Iron Curtain,” she previously said. “It was very symbolic in terms of the changes that were happening.” After about two years, the Soviet Union will collapse.

Neil Saunders, managing director of GlobalData, said in a note Monday that McDonald’s exit “represents a new isolationism in Russia, which must now look inward for investment and consumer brand development.” He added that other Western brands are taking a “principled stance on the concepts of freedom and democracy” and are reconsidering their business in Russia.

Too expensive to leave

McDonald’s will receive a significant writedown from the exit from Russia – from $1.2 billion to $1.4 billion. The shares were barely changed in early trading.

“The fact that McDonald’s owns most of its restaurants in Russia means there is an asset-rich company to sell,” Saunders said. “However, given the conditions 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, it is unlikely that the selling price will be close to pre-invasion book value.”

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, lease payments, and supplies. The other $100 million was from food and other items that she would have to dispose of.

McDonald’s had 847 restaurants in Russia at the end of last year, according to an investor document. Together with 108 others in Ukraine, they accounted for 9% of the company’s revenue in 2021.

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CNN Business’s Danielle Wiener Brunner contributed to this report.