McDonald’s is closing its doors in Russia, ending an era of optimism and tightening the country’s isolation over the war in Ukraine.
Chicago burgers giant confirmed on Monday that it is selling its 850 restaurants in Russia. McDonald’s said it would look for a buyer to hire 62,000 workers in Russia and would continue to pay those workers until the deal is completed.
“Some might argue that providing access to food and continuing to work for tens of thousands of ordinary citizens is certainly the right thing to do,” said McDonald’s President and CEO Chris Kempczynski in a letter to officials. “But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine.
McDonald’s said it was the first time the company had ever “de-archived” or left a major market. He plans to begin removing gold arches and other symbols and signs with the company’s name. McDonald’s also said it would keep its brands in Russia and take steps to implement them if necessary.
McDonald’s said in early March that it was temporarily closing its stores in Russia, but would continue to pay its employees. It was an expensive decision. Late last month, the company said it was losing $ 55 million each month due to restaurant closures. He also lost $ 100 million in inventory.
McDonald’s has also closed 108 restaurants in Ukraine and continues to pay its employees there.
Western companies are struggling to get out of Russia, suffering the brunt of suspending or closing operations in the face of sanctions. Others have remained in Russia, at least in part, with some facing a backlash.
French carmaker Renault said Monday it would sell its majority stake in Russian carmaker Avtovaz and a Moscow plant to the state, the first major nationalization of foreign business since the start of the war.
Maxim Sich, a professor of management and organization at the University of Michigan’s Ross School of Business, said McDonald’s and others are also facing pressure from customers, employees and investors on their Russian operations.
“The era in which companies could avoid taking a position is over,” Sich said. “People want to be connected to companies that do the right thing. There is much more to business – and life – than maximizing profit margins. “
Russia’s first McDonald’s restaurant opened in the middle of Moscow more than three decades ago, shortly after the fall of the Berlin Wall. It was a powerful symbol of easing tensions from the 1991 Cold War between the United States and the Soviet Union.
Now the company’s release is symbolic of a new era, analysts say. Sich, who lived in Russia when McDonald’s entered the market and remembers the excitement surrounding the opening, said the closure meant a return to the Soviet era of isolation.
“It is really painful to see how many years of achievements on the democratic front have been destroyed by this brutal war in Ukraine,” he said.
Kempczynski left open the possibility of McDonald’s returning to the Russian market one day.
“It is impossible to predict what the future may hold, but I choose to end my message with the same spirit that brought McDonald’s to Russia in the first place: hope,” he wrote in a letter to an official. “So let’s not end with the words ‘goodbye.’ Instead, let’s say, as they do in Russian: Until we meet again.
McDonald’s owns 84% of its restaurants in Russia; the rest are managed by franchisees. Because it will not license its brand, the selling price is unlikely to be close to the value of the business before the invasion, said Neil Saunders, managing director of GlobalData, a corporate analytics company.
McDonald’s said it expects to file charges of earning between $ 1.2 billion and $ 1.4 billion when it leaves Russia.
McDonald’s has more than 39,000 seats in more than 100 countries. Most are owned by franchisees – only about 5% are owned and operated by the company.
McDonald’s said that leaving Russia will not change its forecast for adding a net 1,300 restaurants this year, which will contribute about 1.5% to sales growth across the company.
Last month, McDonald’s Corp. reported that it earned $ 1.1 billion in the first quarter, which is less than more than $ 1.5 billion a year earlier. Revenue was nearly $ 5.7 billion.
Shares of McDonald’s fell 21 cents to $ 244.83 in the afternoon trading.
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