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Home›Nationalization›McDonald’s leaves Russia as the country’s isolation increases

McDonald’s leaves Russia as the country’s isolation increases

By Mary Jenkins
May 16, 2022
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(Bloomberg) – McDonald’s Corp. announced it would withdraw from Russia after more than 30 years in the country, stepping up the corporate response to the invasion of Ukraine.

This departure has both symbolic and economic weight because the fast food chain was one of the first Western brands to establish itself in Russia when it opened a branch in Pushkin Square in Moscow in 1990, just before the fall of the Soviet Union. 30,000 people reportedly lined up at the restaurant on the day it opened.

“McDonald’s and Russia have become so intertwined that it seems impossible to imagine one without the other,” CEO Chris Kempczinski said Monday in a memo to employees. “And yet, unfortunately, that’s where we are today.”

Businesses selling food and other basic necessities, or with large networks of stores in Russia, were initially more reluctant to pull out of the country altogether after the start of the war in Ukraine.

McDonald’s has started a sales process after temporarily closing its restaurants, the company said in a statement Monday. He expects a write-off of $1.2 billion to $1.4 billion for the move.

The fast-food chain said the humanitarian crisis in Ukraine and the resulting unpredictable operating environment meant it was no longer tenable to operate in Russia, “nor was it in line with values of McDonald’s”.

McDonald’s is continuing to sell its entire portfolio of restaurants to a local buyer and will ‘de-socket’ outlets, removing the McDonald’s name, logo, brand and menu, although the company will retain its brands in Russia . The company has not named a potential buyer.

Moving Renault

Earlier on Monday, French automaker Renault SA agreed to transfer its 2.2 billion euro ($2.3 billion) Russian operations, including Lada brand producer, to state-owned entities for a fee. symbolic in what amounts to nationalization.

McDonald’s said in March it was temporarily shutting down operations in Russia, where it employs 62,000 people. The decision then came after days of criticism on social media and backlash from investors.

Russia is one of the largest markets held by the chain with nearly 850 stores, just behind Australia, the United Kingdom, Germany, Canada and France. Unlike many peer restaurants, which are franchised in Russia, the majority of McDonald’s locations in Russia are owned and operated directly by the company, making exiting complex.

“I don’t want to sell to an oligarch”: a CEO on leaving Russia

The day-to-day running of restaurants in Russia has become increasingly difficult for McDonald’s amid US and European sanctions and retaliatory measures from President Vladimir Putin. The rise in commodity prices triggered by the conflict has created new headaches on top of pre-existing inflationary measures.

McDonald’s said in April that the suspension of operations in Russia and Ukraine resulted in a first quarter outlay of $27 million to continue paying salaries, leases and supplier obligations. The company also said at the time that about $100 million in inventory needed to be thrown away due to temporary store closures in the area.

The chain said it would continue to pay local staff while it searches for a buyer. He reaffirmed his guidance for the current year and said he expects operating margin to be around 40% due to the Russian charge.

McDonald’s shares rose 1% in premarket trading.

© 2022 Bloomberg L.P.

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