McDonald’s Says They Are Leaving Russia After More than 30 Years

The CEO of McDonald’s says the company is leaving Russia after more than 30 years over the Ukraine war between the two nations. A move that is sure to hurt McDonald’s stocks and bottom line for years to come.

‘It is impossible to ignore the humanitarian crisis caused by the war in Ukraine. And it is impossible to imagine the Golden Arches representing the same hope and promise that led us to enter the Russian market 32 years ago,’ Chief Executive Officer Chris Kempczinski said in a letter to employees.

The world’s largest burger chain, which owns about 84% of its nearly 850 restaurants Russia, will take a related non-cash charge of up to $1.4 billion following its sale.

McDonald’s had in March decided to close its restaurants in the country, including the iconic Pushkin Square location in central Moscow – a symbol of flourishing American capitalism in the dying embers of the Soviet Union.

“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.”

The company last year generated about $2 billion of its revenue from Russia and Ukraine, which is nearly 10% of the companies income. This will be a massive loss for the chain.

McDonald’s is looking to sell its restaurants to a local buyer and would not allow the stores to use its name, logo, branding and menu, retaining its trademark in Russia.

Will Russia or a Russian buyer be some kind after McDonald’s has repeatedly bashed the Kremlin in the press?

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

The company 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.

McDonald’s restaurants are expected to start reopening under a new ownership in June, a source close to the company in Russia said.

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

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

Thanks to our friends at Reuters for contributing to this article.

Howard Roark

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