McDonald's to exit Russia over 'humanitarian crisis in Ukraine'

The world's largest burger chain decided in March to close its 847 restaurants in the country

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McDonald's on Monday became one of the biggest global names to exit Russia, laying out plans to sell all its restaurants following its invasion of Ukraine after operating for more than 30 years in the country.

The world's largest burger chain, which owns about 84 per cent of its 847 restaurants in Russia, will take a related non-cash charge of up to $1.4 billion.

McDonald's had in March decided to close its restaurants in the country, including the iconic Pushkin Square location in central Moscow.

In the Russia of the early 1990s, the burger chain became a way to sample western food and culture for millions of people, even though the cost of one burger was several times higher than many city dwellers' daily budgets.

Customers stand outside the newly-opened, first McDonald's in the Soviet Union, at Moscow's Pushkin Square, in January 1990. AFP

“Some might argue that providing access to food and continuing to employ tens of thousands of ordinary citizens is surely the right thing to do,” chief executive Chris Kempczinski said in a letter to employees. “But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine.”

Though a vast majority of the stores in Russia are closed, a few franchised stores have stayed open, cashing in on the chain's skyrocketing popularity. McDonald's generated about 9 per cent, or $2bn, of its revenue from Russia and Ukraine last year.

At the weekend, social media footage showed long, snaking queues at the restaurant in Moscow's Leningradsky Station, one of the capital's only branches that has remained open.

McDonald's said it was looking to sell its restaurants in Russia to a local buyer, but will retain its trademarks.

“Given the circumstances of the sale, the financial challenges faced by potential Russian buyers, and the fact that McDonald's will not licence its brand name or identity, it is unlikely the sale price will be anywhere near the pre-invasion book value of the business,” said Neil Saunders, managing director of GlobalData.

McDonald's said it would ensure its 62,000 employees in Russia continue to be paid until the close of any transaction and that they have future jobs with any potential buyer.

After McDonald's decision to close stores in March, several American brands including Starbucks, PepsiCo and Coca-Cola followed suit, scrambling to comply with sanctions and deal with threats from the Kremlin that foreign-owned assets may be seized.

“I would not be surprised to see other companies follow McDonald's lead of exiting the market,” Edward Jones analyst Brian Yarbrough said.

Earlier in the day, French car maker Renault said it would sell its majority stake in Avtovaz to a Russian science institute.

Updated: May 16, 2022, 4:03 PM
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