WORLD NEWS

De-Arching: McDonald’s to sell Russia business, exit country

May 16, 2022, 5:00 PM | Updated: May 17, 2022, 8:11 am
FILE - McDonald's restaurant is seen in the center of Dmitrov, a Russian town 75 km., (47 miles) no...

FILE - McDonald's restaurant is seen in the center of Dmitrov, a Russian town 75 km., (47 miles) north from Moscow, Russia, on Dec. 6, 2014. McDonald’s says it's started the process of selling its Russian business, which includes 850 restaurants that employ 62,000 people. The fast food giant pointed to the humanitarian crisis caused by the war, saying holding on to its business in Russia “is no longer tenable, nor is it consistent with McDonald’s values.” The Chicago-based company had temporarily closed its stores in Russia but was still paying employees. (AP Photo/FILE)

(AP Photo/FILE)

McDonald’s is closing its doors in Russia, ending an era of optimism and increasing the country’s isolation over its war in Ukraine.

The Chicago burger giant confirmed Monday that it is selling its 850 restaurants in Russia. McDonald’s said it will seek a buyer who will employ its 62,000 workers in Russia, and will continue to pay those workers until the deal closes.

“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,” McDonald’s President and CEO Chris Kempczinski said in a letter to employees. “But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine.”

McDonald’s said it’s the first time the company has ever “de-arched,” or exited a major market. It plans to start removing golden arches and other symbols and signs with the company’s name. McDonald’s said it will also will keep its trademarks in Russia and take steps to enforce them if necessary.

McDonald’s said in early March that it was temporarily closing its stores in Russia but would continue to pay its employees. It was a costly decision. Late last month, the company said it was losing $55 million each month due to the restaurant closures. It also lost $100 million worth of inventory.

McDonald’s has also closed 108 restaurants in Ukraine and continues to pay its employees there.

Western companies have wrestled with extricating themselves from Russia, enduring the hit to their bottom lines from pausing or closing operations in the face of sanctions. Others have stayed in Russia at least partially, with some facing blowback.

French carmaker Renault said Monday that it would sell its majority stake in Russian car company Avtovaz and a factory in Moscow to the state — the first major nationalization of a foreign business since the war began.

Maxim Sytch, a professor of management and organizations at the University of Michigan’s Ross School of Business, said McDonald’s and others also face pressure from customers, employees and investors over their Russian operations.

“The era where companies could avoid taking a stance is over,” Sytch said. “People want to be associated with companies that do the right thing. There’s much more to business __ and life __ than maximizing profit margins.”

McDonald’s first restaurant in Russia opened in the middle of Moscow more than three decades ago, shortly after the fall of the Berlin Wall. It was a powerful symbol of the easing of Cold War tensions between the United States and Soviet Union, which would collapse in 1991.

Now, the company’s exit is proving symbolic of a new era, analysts say. Sytch, who lived in Russia when McDonald’s entered the market and remembers the excitement surrounding the opening, said the closing signifies a reversal to the Soviet era of isolation.

“It’s really painful to see the many years of gains on the democratic front being wiped out with this atrocious war in Ukraine,” he said.

Kempczinski left open the possibility that McDonald’s could someday return to the Russian market.

“It’s impossible to predict what the future may hold, but I choose to end my message with the same spirit that brought McDonald’s to Russia in the first place: hope,” he wrote in his employee letter. “Thus, let us not end by saying, ‘goodbye.’ Instead, let us say as they do in Russian: Until we meet again.”

McDonald’s owns 84% of its restaurants in Russia; the rest are operated by franchisees. Because it won’t license its brand, the sale price likely won’t be close to the value of the business before the invasion, said Neil Saunders, managing director of GlobalData, a corporate analytics company.

McDonald’s said it expects to record a charge against earnings of between $1.2 billion and $1.4 billion over leaving Russia.

McDonald’s has more than 39,000 locations across more than 100 countries. Most are owned by franchisees — only about 5% are owned and operated by the company.

McDonald’s said exiting Russia will not change its forecast of adding a net 1,300 restaurants this year, which will contribute about 1.5% to companywide sales growth.

Last month, McDonald’s Corp. reported that it earned $1.1 billion in the first quarter, down from more than $1.5 billion a year earlier. Revenue was nearly $5.7 billion.

Shares of McDonald’s closed Monday down $1 at $244.04.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Lifetime Windows & Doors

World News

Ukrainian servicemen carry the coffin with the remains of Army Col. Oleksander Makhachek during a f...
Associated Press

As Ukraine loses troops, how long can it keep up the fight?

ZHYTOMYR (AP) — As soon as they had finished burying a veteran colonel killed by Russian shelling, the cemetery workers readied the next hole. Inevitably, given how quickly death is felling Ukrainian troops on the front lines, the empty grave won’t stay that way for long. Col. Oleksandr Makhachek left behind a widow, Elena, and […]
21 days ago
(Instagram photo/@Clayton.Wolfe)...
Wills Rice

Arizona realtor announces new listing on ‘the top-floor’ of Mount Everest

Arizona realtor Clayton Wolfe scaled the treacherous 29,035-foot heights of Mount Everest in Nepal and announced a new listing at the summit.
22 days ago
(Photo by: Jonathan Wiggs/Boston Globe/Getty Images)...
Associated Press

‘Tiger King’ star ‘Doc’ Antle arrested for money laundering charges

“Tiger King” star “Doc” Antle was arrested by the FBI and expected to appear in court Monday to face federal money laundering charges.
22 days ago
(AP Photo/Ross D. Franklin)...
Associated Press

Arizona Gov. Doug Ducey in Israel for talks with political and business leaders

Arizona Gov. Doug Ducey is in Israel for five days of talks with political and business leaders of the Middle Eastern country.
28 days ago
A man rides a bicycle in front of a building ruined by shelling in Borodyanka, on the outskirts of ...
Associated Press

Russia takes steps to bolster army, tighten grip on Ukraine

KYIV, Ukraine (AP) — Russian President Vladimir Putin issued an order Wednesday to fast track Russian citizenship for residents of parts of southern Ukraine largely held by his forces, while lawmakers in Moscow passed a bill to strengthen the stretched Russian army. Putin’s decree applying to the Kherson and Zaporizhzhia regions could allow Russia to […]
1 month ago
Patrick Michael Jones, 34, a volunteer from Houston, U.S. helps Ukrainian women Vera, 59, left, and...
Associated Press

Live updates | Biden: US sending another $150M in assistance

WASHINGTON — President Joe Biden on Friday authorized the shipment of another $150 million in military assistance for Ukraine for artillery rounds and radar systems in its fight against Russia’s invading forces. Biden said the latest spending means his administration has “nearly exhausted” what Congress authorized for Ukraine in March and called on lawmakers to […]
2 months ago

Sponsored Articles

...
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

Vaccines are safe if you are pregnant or breastfeeding

Are you pregnant? Do you have a friend or loved one who’s expecting?
...
CANVAS ANNUITY

Best retirement savings rates hit 4.30%

Maximize your retirement savings with guaranteed fixed rates up to 4.30%. Did you know there is a financial product that can give you great interest rates as you build your retirement savings and provide you with a paycheck for life once you retire? It might sound too good to be true but it is not; this product is called an annuity.
...
Arizona Division of Problem Gambling

Arizona Division of Problem Gambling provides exclusion solution for young sports bettors

Sports betting in Arizona opened a new world to young adults, one where putting down money on games was as easy as sending a text message.
De-Arching: McDonald’s to sell Russia business, exit country