McDonald’s to exit the Russian market entirely and sell its business

McDonald’s has gone a step further in its initial plan to shut down stores in Russia, taking a massive hit in the process.

American fast-food giant McDonald’s will exit the Russian market entirely and sell its huge business in the increasingly isolated country, the company said on Monday.

Initially, McDonald’s shuttered its 850 Russian branches when Moscow invaded Ukraine and held out the prospect that it could return. It continued to pay its 62,000 employees in the nation.

McDonald’s was one of the first western brands to open in Russia and, in the 1990s, it was seen as potent symbol of Russia opening to the world.

But it has said it will now begin “de-Arching” its stores in Russia in a move expected to cost the firm some $US1.4 billion ($2bn).

Many Western businesses temporarily pulled out of Russia after its invasion of Ukraine in February. But McDonald’s is the latest company to confirm it has no plans to return as the war drags on and following revelations of Moscow’s cruelty in Ukraine.

Earlier on Monday, French automaker Renault also announced it had handed over its Russian assets to the government in Moscow, marking the first major nationalisation of the economic disentanglement.

People walk past the McDonald's flagship restaurant at Pushkinskaya Square – the first one of the chain opened in the USSR on January 31, 1990.

“De-Arching’ Russia

On Monday, McDonald’s confirmed it had no plans to return to Russia.

“After more than 30 years of operations in the country, McDonald’s Corporation announced it will exit the Russian market and has initiated a process to sell its Russian business.” it said in a statement.

“The humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable, nor is it consistent with McDonald’s values.”

It said it was looking to sell “its entire portfolio of McDonald’s restaurants in Russia to a local buyer” in a move that is estimated to cost the business $1.2-1.4 billion (A$2.02 billion).

“The Company intends to initiate the process of “de-Arching” those restaurants, which entails no longer using the McDonald’s name, logo, branding, and menu, though the Company will continue to retain its trademarks in Russia.”

The firm said it was seeking to ensure its employees would continue to be paid until a buyer was found and that they would be able to find new employment with whoever took over.

Russia, where McDonald’s directly manages more than 80 per cent of the restaurants bearing its name, accounts for 9 per cent of the company’s revenue and 3 per cent of its operating profit.

McDonald’s Chief Executive Officer Chris Kempczinski said in a statement: “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.

(FILES) In this file photo taken on March 09, 2022, people enter a McDonald's restaurant in Moscow. – U.S. fast-food giant McDonald's, which closed its stores in Russia in early March, announced on May 16, 2022 that it was pulling out of the country and selling all its operations in response to the Russian invasion of Ukraine. (Photo by AFP)

“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.”

On February 24, Russia’s President Vladimir Putin ordered troops into Ukraine, triggering unprecedented Western sanctions against Russia and sparking an exodus of foreign corporations including H&M, Starbucks and Ikea.

The authorities said they were ready to nationalise foreign assets — as happened with Renault — and some officials assured Russians that their favourite brands would have domestic alternatives.

Officials in Moscow have sought to downplay the gravity of the Western sanctions, promising that Russia will adapt and take steps to stop the flight of foreign currency and capital.

– with AFP.