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Golden Arches get dark in Russia as McDonald's exits after 30 years

Golden Arches get dark in Russia as McDonald’s exits after 30 years

  • Burger chain to keep its brand in Russia
  • Outlets to start reopening under new owner in June – source
  • The company will incur a non-cash fee of up to $1.4 billion

May 16 (Reuters) – McDonald’s Corporation (MCD.N) On Monday, it became one of the biggest global brands to come out of Russia, as it made plans to sell all of its restaurants after operating in the country for more than 30 years after the invasion of Ukraine.

The world’s largest burger chain, which owns about 84% of nearly 850 restaurants in Russia, will charge a non-cash related fee of up to $1.4 billion after it is sold.

McDonald’s decided in March to close its restaurants in the country, including the site of the famous Pushkin Square in the center of Moscow – a symbol of the flourishing of American capitalism in the moribund coals of the Soviet Union.

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The burger chain represented the meltdown of Cold War tensions and became a way of tasting Western food and soul for millions of people, even though the cost of the burger was many times greater than the daily budgets of many city dwellers.

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

Although the vast majority of stores in Russia were closed, a few franchise stores remained open, making money from the growing popularity of McDonald’s.

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Over the weekend, footage on social media showed long queues appearing at the restaurant at Moscow’s Leningradsky station, one of the only branches in the capital that was open.

Last year the company generated about 9%, or $2 billion, of its revenue from Russia and Ukraine.

The McDonald’s restaurant logo appears in the window with a reflection of the Kremlin Tower in central Moscow, Russia, March 9, 2022. REUTERS/Maxim Shemetov

keep the brand

McDonald’s is looking to sell its restaurants to a local buyer and will not allow stores to use its name, logo, brand and menu, while retaining its brand in Russia.

“It (a brand) gives them a long-term option to be able to re-enter the market,” Edward Jones analyst Brian Yarbrough said.

The company said it will ensure that its 62,000 employees in Russia continue to be paid until any transaction is closed and that they have future jobs with any potential buyer.

A source close to the company in Russia said that McDonald’s restaurants are expected to begin reopening under new ownership in June.

“It’s a blow to McDonald’s financially, but it shows that Western companies and brands are calculating that they either cannot do business in Russia or that the costs, including reputational costs, are too high,” said Paul Musgrave, a professor of political science at the University of Massachusetts. .

Earlier today, French automaker Renault (RENA.PA) She said she would sell her largest stake in Avtovaz (AVAZI_p.MM) to a Russian scientific institute, where companies are scrambling to comply with sanctions and deal with the Kremlin’s threats of possible foreign-owned assets. Read more

Analysts expect more major brands to follow McDonald’s lead. Starbucks Corporation (SBUX.O) The Coca-Cola Company (KO.N) They have already halted operations in Russia.

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“I wouldn’t be surprised to see other companies follow McDonald’s lead by exiting the market,” said Yarbrough of Edward Jones.

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(Reporting by Uday Sampath, Praveen Paramasivam and Deborah Sophia in Bengaluru; Editing by Sriraj Kalovila and Arun Koyor

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