De-Arching: McDonald’s to sell Russia business, exit country | National News

 De-Arching: McDonald’s to sell Russia business, exit country | National News


By DAVID KOENIG and DEE -ANN DURBIN – AP Business Writers

McDonald’s closed its doors to Russia, ending a period of optimism and increasing the country’s isolation in its war with Ukraine.

The Chicago burger giant confirmed on Monday that it has sold to 850 Russian restaurants. McDonald’s said it will find a buyer that will employ 62,000 Russian workers, and will continue to pay workers until the deal ends.

“Some might argue that giving access to food and continuing to work for thousands of ordinary citizens, is certainly the right thing to do,” McDonald’s President and CEO Chris Kempczinski said in a letter to employees. “But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine.”

McDonald’s said this is the first time the company has “de-arched,” or exited a major market. It plans to begin removing gold arches and other symbols and signs bearing the company name. McDonald’s says it will also keep its trademarks in Russia and take steps to enforce them if necessary.

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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. Last month, the company said it lost $ 55 million per month due to restaurant closures. It also lost $ 100 million worth of inventory.

McDonald’s also closed 108 restaurants in Ukraine and continues to pay its employees there.

Western companies are struggling to distance themselves from Russia, suffering from hitting their bottom line from stopping or closing operations in the face of sanctions. Some remain in Russia even in part, with others facing blowback.

French carmaker Renault said Monday it would sell its majority stake in Russian auto company Avtovaz and a Moscow -based factory in the state – the first major nationalization of a foreign business since the war began.

Maxim Sytch, a professor of management and organizations at the Ross School of Business at the University of Michigan, said McDonald’s and others are also facing pressure from customers, employees and investors over their operations in Russia. .

“The era where companies can avoid taking a stand is over,” Sytch said. “People want to partner with companies that do the right thing. There’s a lot more to business __ and life __ than increasing profit margins.”

Russia’s first McDonald’s restaurant opened in the center of Moscow more than three decades ago, shortly after the fall of the Berlin Wall. It was a powerful symbol of easing Cold War tensions between the United States and the Soviet Union, which collapsed in 1991.

Today, the company’s exit proves symbolic of a new era, analysts say. Sytch, who was living in Russia when McDonald’s entered the market and recalled the excitement surrounding the opening, said the closure meant a turning point in the Soviet era of secession.

“It hurts so much to see so many years of victory on the democratic front wiped out by this fierce war in Ukraine,” he said.

Kempczinski left open the possibility that McDonald’s in the future could return to the Russian market.

“It’s impossible to predict what’s to come, but I chose to end my message in the same spirit that brought McDonald’s to Russia in the first place: hope,” he wrote in his letter to the employee. “So, let’s not stop saying, ‘goodbye.’ Instead, let’s say as they do in Russian: Until we meet again.

McDonald’s owns 84% ​​of its restaurants in Russia; others are run by franchisees. Because it is not licensed under its brand, the selling price is unlikely to come close to the value of the business before the raid, said Neil Saunders, managing director of GlobalData, a corporate analytics company.

McDonald’s says it hopes to record a charge against revenue of between $ 1.2 billion and $ 1.4 billion on leaving Russia.

McDonald’s has more than 39,000 locations in more than 100 countries. Most are owned by franchisees-only about 5% are owned and operated by the company.

McDonald’s says Russia’s exit will not change its forecast to add a net of 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, up from more than $ 1.5 billion last year. Revenue is nearly $ 5.7 billion.

In afternoon trading, shares of McDonald’s fell 21 cents to $ 244.83.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or distributed without permission.



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