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McDonald’s will sell Russian operations to existing Siberian licensee

The Kremlin’s tower and passers-by are seen reflected in the window of a closed McDonald’s restaurant in Moscow on May 16, 2022.

Natalia Kolesnikova | AFP | Getty pictures

McDonald’s said on Thursday that it has entered into an agreement to sell its Russian business to its current licensee in the market, Alexander Govor.

Govor will buy all McDonald̵[ads1]7;s locations in Russia and will operate them under a new brand. He also agreed to retain employees for at least two years, on similar terms, and finance the salaries of corporate employees working in 45 regions of the country until the agreement is terminated and existing obligations to suppliers, landlords and utilities.

Financial terms for the agreement were not published.

McDonald’s said Monday that it expects to record a non-cash cost of $ 1.2 to $ 1.4 billion related to net investment in Russia and currency losses.

The sale is expected to be completed in the coming weeks if government approval is secured. It marks the end of an era for the fast-food giant, which first entered the country just months before the dissolution of the Soviet Union.

“McDonald’s in Russia embodied the very notion of glasnost and gained an overarching significance,” CEO Chris Kempczinski wrote in a letter to the McDonald’s system on Monday after the company announced its intention to sell.

In the three decades since the opening of its first location in Moscow, McDonald’s has grown its Russian business to approximately 850 locations. The company owned around 84% of these restaurants, while the rest were run by franchisees. Owning several of the restaurants generates greater income for the company, but opens it up for greater risk in times of unrest or economic downturn.

In early March, after the Kremlin invaded Ukraine, McDonald’s said it would temporarily close its Russian locations. The company said in late April that the shutdown of operations in Ukraine and Russia due to the war cost it $ 127 million during the first quarter. And on Monday, it revealed that they were planning to sell the business.

“Some may argue that providing access to food and continuing to employ tens of thousands of ordinary citizens is certainly the right thing to do. But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine,” Kempczinski said in his letter. . .

Other Western companies are also choosing to sell their Russian businesses, including carmaker Renault and oil giant Exxon Mobil.

Govor operates 25 McDonald’s locations in Siberia and has been a licensee in the fast food chain since 2015.

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