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McDonald’s leaves Russia completely

The burger chain wants to sell its Russia business, saying the “humanitarian crisis caused by the war in Ukraine, and the triggering unpredictable operating environment, has led McDonald’s to conclude that continued ownership of the business in Russia is no longer sustainable, nor is it. consistent with McDonald’s values. ”

In March, shortly after the war began, McDonald’s followed other Western companies and temporarily shut down restaurants in Russia.
Once the sale is complete, the Russian restaurants will be “de-Arched”[ads1];, which means that the locations will no longer be allowed to use McDonald’s name, logo or menu. McDonald’s (MCD) said that employees will continue to be paid until the transaction is completed and that “employees have future employment with any potential buyer.”

CEO Chris Kempczinski said he was proud of the more than 60,000 workers employed in Russia and said the decision was “extremely difficult.”

“But we have a commitment to our global community and must remain steadfast in our values. And our commitment to our values ​​means we can no longer keep the arches shining there,” he said.

End of an era

The decision leads to a remarkable end to McDonald’s three decades of relations with Russia. McDonald’s opened the doors of its first restaurant in Moscow on January 31, 1990. More than 30,000 were served and the location of Pushkin Square had to stay open hours later than planned due to the crowds.

Arriving in Moscow was about more than just Big Macs and french fries, noted Darra Goldstein, a Russia expert at Williams College. It was the most prominent example of Soviet President Mikhail Gorbachev’s attempt to open up his crumbling country to the outside world.

“There was a really visible crack in the iron curtain,” she said earlier. “It was very symbolic of the changes that took place.” About two years later, the Soviet Union was to collapse.

McDonald’s exit “represents a new isolationism in Russia, which must now look inward for investment and consumer brand development,” said Neil Saunders, CEO of GlobalData 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 great cost to leave

McDonald’s will take a significant write-off from leaving Russia – between 1.2 and 1.4 billion dollars. The shares were barely changed in early trading.

“The fact that McDonald’s owns most of its restaurants in Russia means that it is a rich business to sell,” said Saunders. “But given the circumstances surrounding the sale, the financial challenges facing potential Russian buyers, and the fact that McDonald’s will not license the brand name or identity, it is unlikely that the sale price will be close to book value before the invasion of the Company.”

In its latest earnings report, McDonald’s said it had cost $ 127 million to close restaurants in Russia in the previous quarter. Nearly $ 27 million came from staff costs, lease payments and supplies. The other $ 100 million came from food and other items it had to dump.

McDonald’s had 847 restaurants in Russia at the end of last year, according to an investor document. Together with another 108 in Ukraine, they accounted for 9% of the company’s revenue in 2021.

– CNN Business’ Danielle Wiener-Bronner contributed to this report.

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