By Uday Sampath Kumar
(Reuters) -McDonald’s Corp on Monday became one of the biggest global brands to exit Russia, laying out plans to sell all its restaurants after operating in the country for more than 30 years following the invasion of Ukraine.
The world’s largest burger chain, which owns about 84% of its nearly 850 restaurants in 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.
The burger chain represented the thawing of Cold War tensions and became a way to sample Western food and spirit for millions of people, even though the cost of a burger was several times bigger than the daily budgets of many city dwellers.
“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.”
Though a vast majority of the stores in Russia are closed, a few franchised stores have stayed open, cashing in on the sky-rocketing popularity of McDonald’s.
Over the weekend, long queues were seen at the restaurant in Moscow’s Leningradsky Station, one of the capital’s only branches that was open, social media footage showed.
The company last year generated about 9%, or $2 billion, of its revenue from Russia and Ukraine.
RETAINS TRADEMARK
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.
“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.
Earlier in the day, French carmaker Renault said it would sell its majority stake in Avtovaz to a Russian science institute, as companies scramble to comply with sanctions and deal with threats from the Kremlin that foreign-owned assets may be seized.
Analysts expect more major brands to follow McDonald’s. Starbucks Corp and Coca-Cola Co have already paused operations in Russia.
“I would not be surprised to see other companies follow McDonald’s lead of exiting the market,” Edward Jones’ Yarbrough said.
(Reporting by Uday Sampath, Praveen Paramasivam, Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila and Arun Koyyur)
