After more than 30 years of operation in the country McDonald’s, the first US fast-food restaurant to open in the Soviet Union, is about to exit Russia by selling all its business.
In a statement, the company said that the humanitarian crisis caused by the Ukraine conflict has resulted in an unpredictable operating environment, making it difficult to hold on its business in Russia “is no longer tenable, nor is it consistent with McDonald’s values.”
In early March, the fast-food giant announced it was temporally shutting down its restaurants in the country, suspending operations while promising to continue paying its employees.
McDonald’s intends to flog its entire portfolio of restaurants off to a local buyer. A process otherwise known “de-Arching” which entails no longer using the McDonald’s name, logo, branding, and menu. However, the company will still retain its trademarks in Russia if it decides to come back in future.
McDonald’s opened the doors of its first restaurant in Russia 30 years ago, on Jan. 31, 1990. With 900 seats, it was the largest McDonald’s in the world at the time.
CEO Chris Kempczinski, said, “We have a long history of establishing deep, local roots wherever the Arches shine. We’re exceptionally proud of the 62,000 employees who work in our restaurants, along with the hundreds of Russian suppliers who support our business, and our local franchisees. Their dedication and loyalty to McDonald’s make today’s announcement extremely difficult.
“However, we have a commitment to our global community and must remain steadfast in our values. And our commitment to our values means that we can no longer keep the Arches shining there.” Kempczinski added.
Later in an emotional update, Chris expressed his regrets on the Ukraine situation and the humanitarian crisis. He was hoping for peace to return soon to the region which didn’t materialize. He concluded his message by
Thus, let us not end by saying, “goodbye.” Instead, let us say as they do in Russian: До новой встречи. “Until we meet again.”
CEO Chris Kempczinski,
On the other hand, a source at McDonald’s told Russian news agency, restaurants will open in Russia under a new brand in mid-June, while jobs, most suppliers, and the menu will be retained.
“More than 90% of suppliers are Russian, cooperation with them will continue. In fact, only the name will go away,” the source said.
After McDonald’s announcement, the Russian authorities revealed the possibility of replacing the company’s market share with Russian chains. Moscow Mayor Sergei Sobyanin believes that Russian companies can replace up to 250 restaurants in a year.
McDonald’s said it expects to record a charge against earnings of between $1.2 billion and $1.4 billion over leaving Russia.
Its restaurants in Ukraine are closed, but the company said it is continuing to pay full salaries for its employees there.
McDonald’s has more than 39,000 locations across more than 100 countries. Most are owned by franchisees — only about 5% are owned and operated by the company.
McDonald’s said exiting Russia will not change its forecast of adding a net 1,300 restaurants this year, which will contribute about 1.5% to companywide sales growth.
Last month, McDonald’s reported that it earned $1.1 billion in the first quarter, down from more than $1.5 billion a year earlier. Revenue was nearly $5.7 billion.
After Russia launched its special military operation in Ukraine, a number of Western companies suspended their activities in Russia.
Yum! Brands, which owns the KFC and Pizza Hut brands, announced the suspension of investment and development in Russia. Burger King noted in early March that they intend to continue their work, with the opening of new restaurants in the country already planned.