The burger chain will sell its Russian business, saying “the humanitarian crisis caused by the war in Ukraine and the precipitating unpredictable operating environment have led McDonald’s to conclude that maintaining corporate ownership in Russia is not more tenable or consistent with McDonald’s values.”
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 have a commitment to our global community and must stay true to our values. And our commitment to our values means that we can no longer make the Arches shine there,” he said.
End of an era
The move brings a remarkable end to McDonald’s three-decade relationship with Russia. McDonald’s opened its first restaurant in Moscow on January 31, 1990. Over 30,000 people were served, and the Pushkin Square location had to stay open hours later than expected due to crowds.
His arrival in Moscow was not limited to Big Macs and fries, noted Darra Goldstein, Russia specialist at Williams College. It was the starkest 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 happening.” About two years later, the Soviet Union would collapse.
McDonald’s exit “represents a new isolationism in Russia, which must now look inward for investment and consumer brand development,” Neil Saunders, chief executive of GlobalData, said in a note on Monday. He added that other Western brands are taking “a principled stance on the concepts of freedom and democracy” and revisiting their business in Russia.
A big cost to leave
McDonald’s will suffer a significant depreciation upon leaving Russia – between $1.2 billion and $1.4 billion. Stocks barely changed at the start of the session.
“The fact that McDonald’s owns most of its restaurants in Russia means there’s an asset-rich business to sell,” Saunders said. “However, given the circumstances of the sale, the financial difficulties facing potential Russian buyers and the fact that McDonald’s will not license its brand name or identity, it is unlikely that the price of sale is close to the book value before the invasion of 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 personnel expenses, lease payments and supplies. The remaining $100 million came from food and other items he will have to throw away.
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 turnover in 2021.
— Danielle Wiener-Bronner of CNN Business contributed to this report.