Mcdonald’s sells Russia business
McDonald’s has announced that it will sell its Russian company, just over two months after ceasing operations due to Russia’s invasion of Ukraine.
“Continued ownership of the business in Russia is no longer tenable, nor is it consistent with McDonald’s values,” the company stated.
McDonald’s first opened its doors 32 years ago in Russia. In Russia, it has around 800 restaurants and 62,000 employees. The firm stated that it is looking for a local buyer.
McDonald’s announced Monday that it will sell its Russian company, a little over two months after ceasing operations due to Russia’s invasion of Ukraine.
“McDonald’s has concluded that continued ownership of the business in Russia is neither tenable nor compatible with McDonald’s values,” the firm stated in a statement. During their invasion of Ukraine, Russian forces led by President Vladimir Putin have been accused of a slew of war crimes.
McDonald’s decision to leave Russia marks the end of an era that promised hope.
The brand, which is one of the most well-known icons of American capitalism, established its first restaurant in Russia more than 32 years ago, as the Soviet communist dictatorship crumbled and Western enterprises and ideas infiltrated the Iron Curtain. Hundreds of people would queue to try McDonald’s burgers and fries in Moscow’s Pushkin Square outlet at the time.
According to The Washington Post, a McDonald’s commercial tagline in Russia at the time was “If you can’t go to America, come to McDonald’s in Moscow.”
McDonald’s now operates over 800 outlets in Russia and employs over 62,000 people. Only 15% of its Russian outlets are operated by franchisees, with the remainder owned by the firm.
The firm stated that it is looking for a local buyer.
In a statement released Monday, McDonald’s CEO Chris Kempczinski said, “We have a commitment to our worldwide community and must remain firm in our beliefs.” “And we can no longer keep the Arches gleaming there because of our dedication to our ideals.”
McDonald’s announcement on Monday exemplifies how hostile the Western world has become to Putin’s leadership. McDonald’s first remained mute in the aftermath of Russia’s invasion of Ukraine. Following public criticism and pressure, McDonald’s and other big American businesses such as Starbucks and Coca-Cola halted operations in Russia.
McDonald’s announced on Monday that it would begin “de-Arching” stores in Russia, which means removing the company’s name, emblems, menus, and branding from those locations. However, the corporation stated that it will keep its trademarks in Russia.
The company also stated that it would make every effort to ensure that its employees in the country were paid until the deal was completed and that it would assist them in keeping their positions under the new owners.
McDonald’s claimed its restaurants in Ukraine, which have been under Russian attack since late February, are still closed. The corporation stated that it is still paying full salaries to its employees in that country.
Russia and Ukraine accounted for about 2% of McDonald’s overall sales, 9% of its revenue, and 3% of its operating profitability.
McDonald’s said it expects to take a $1.2 billion to $1.4 billion non-cash charge as a result of its decision to exit the Russian market. The company estimated in March that its temporary suspension will cost it $50 million per month, or 5 to 6 cents per share. In the first quarter, McDonald’s said the suspension of operations in Ukraine and Russia cost $127 million, or 13 cents per share.
Despite the short-term blow, RBC Capital Markets analyst Christopher Carril believes that the move to sell will eventually enhance the stock price.
“Looking ahead, the sale of MCD’s Russia business would essentially shift MCD’s franchised mix to 950 percent, up from 93 percent previously, a benefit to margins in a hard cost environment, and ultimately the stock,” Carril wrote in a note to clients on Monday.