McDonald’s has gone a step further in its initial plan to close stores in Russia, taking a huge hit in the process.
US fast food giant McDonald’s will abandon the Russian market altogether and sell its huge business in the increasingly isolated country, the company said on Monday.
McDonald’s initially closed its 850 Russian branches when Moscow invaded Ukraine and offered the possibility that it could return. It continued to pay its 62,000 employees nationwide.
McDonald’s was one of the first Western brands to open in Russia, and in the 1990s it was seen as a powerful symbol of Russia’s openness to the world.
But it has said it will now start “decommissioning” its stores in Russia in a move that is expected to cost the company about $1.4 billion ($2 billion).
Many Western companies temporarily withdrew from Russia after the invasion of Ukraine in February. But McDonald’s is the latest company to confirm that 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 that it had handed over its Russian assets to the Moscow government, marking the first major nationalization of the economic split.
On Monday, McDonald’s confirmed that it had no plans to return to Russia.
“After more than 30 years of operations in the country, McDonald’s Corporation announced that it will exit the Russian market and has started a process to sell its Russian business.” he said in a statement.
“The humanitarian crisis caused by the war in Ukraine and the precipitous unpredictable operating environment have led McDonald’s to conclude that continued ownership of the business in Russia is no longer sustainable or 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 estimated to cost the company $1.2-1.4 billion (A$2.02 billion).
“The Company intends to begin the process of ‘decommissioning’ those restaurants, which involves ceasing use of the McDonald’s name, logo, brand and menu, although the Company will continue to retain its trademarks in Russia.”
The firm said it wanted to make sure its employees would continue to be paid until a buyer was found and that they could find a new job with someone to take over.
Russia, where McDonald’s directly manages more than 80 percent of the restaurants bearing its name, accounts for 9 percent of the company’s revenue and 3 percent of its operating profit.
McDonald’s CEO Chris Kempczinski said in a statement: “We are 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. Your dedication and loyalty to McDonald’s make today’s announcement extremely difficult.
“However, 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.”
On February 24, Russian President Vladimir Putin ordered troops into Ukraine, triggering unprecedented Western sanctions against Russia and prompting an exodus of foreign corporations, including H&M, Starbucks and Ikea.
Authorities said they were ready to nationalize foreign assets, as happened with Renault, and some officials assured Russians that their favorite brands would have domestic alternatives.
Officials in Moscow have tried to play down the severity of Western sanctions, promising that Russia will adapt and take steps to stop the flight of currency and capital.
– with AFP.