McDonald’s has announced that it will depart Russia permanently after more than 30 years and has begun selling its stores.
The action follows the temporary closure of 850 stores in March.
The fast food behemoth claimed it made the decision because to the “humanitarian crisis” and “unpredictable operational environment” brought on by the Ukraine conflict.
In 1990, the first McDonald’s restaurant opened in Moscow, symbolizing a thaw in Cold War tensions.
The Soviet Union disintegrated a year later, and Russia opened its economy to Western corporations. However, more than three decades later, it is one of an increasing number of companies withdrawing.
In a memo to employees and suppliers, McDonald’s CEO Chris Kempczinski said, “This is a hard subject with no precedent and deep ramifications.”
“Some could argue that continuing to employ tens of thousands of ordinary individuals while giving access to food is clearly the correct thing to do,” he continued.
“However, the humanitarian situation generated by the war in Ukraine cannot be overlooked. And it’s difficult to picture the Golden Arches symbolizing the same hope and promise that drove us to enter the Russian market 32 years ago.”
When McDonald’s opened its first outlet in Moscow’s Pushkin Square in 1990, there was a “feeling of exhilaration,” according to BBC Russia correspondent Steve Rosenberg, with people queuing for hours to try American burgers and fries.
He described it as “a symbol of freedom, of communism embracing capitalism, of the Soviet Union embracing the West.”
Despite the fact that McDonald’s had only temporarily closed its outlets, he said the company’s choice to sell them demonstrated that “things would not return to normal” and was a symbol of “Russia and the West going in two very different directions.”
“I believe we’ll see a lot more international corporations, global names, formally withdraw from the Russian market today,” he added.
De-arching of Restaurants
McDonald’s has said that it will sell all of its locations to a local buyer and will begin the process of “de-arching” the restaurants, which entails removing the company’s name, badge, and menu. In Russia, it will keep its trademarks.
The firm stated that one of its top concerns was to ensure that its 62,000 Russian employees were paid until the sale was completed and that they have “future employment with any potential buyer.”
McDonald’s said it will write down a charge of up to $1.4 billion (£1.1 billion) to fund its investment departure.
The action follows Renault’s announcement that it would be selling its operations in the country. The French company said it will sell its 68 percent stake in Avtovaz to a Russian science institute, while its shares in Renault Russia would go to Moscow.
Renault’s Russian assets have now become state property, according to Moscow, marking the first significant foreign company to be nationalised since the invasion of Ukraine.
In 1990, when McDonald’s opened a store in Moscow, it was a hugely symbolic move: an American cultural icon setting up shop in the heart of the disintegrating Soviet Union.
It’s now going, becoming the latest global brand to leave the country as Russia’s war in Ukraine turns it into an international pariah.
McDonald’s “temporarily” closed its Russian restaurants in March and now believes that staying in the nation would be inconsistent with its beliefs.
Cynics could point out, however, that it only came to that decision after receiving a lot of backlash on social media for neglecting to come out against the Ukraine war.
Renault was likewise hesitant to forsake big investments in Russia until Ukraine’s President Zelensky mentioned it in a speech to the French parliament.
Both companies have now accepted the inevitable.
And the heady days of Russia’s opening up to the world in the early 1990s feel like a distant memory.
Russia and Ukraine accounted for around 9% of McDonald’s global sales last year.
Due to the crisis, the chain’s 108 restaurants in Ukraine remain shuttered, although the company continues to pay all of its employee’s full salaries.
Before suspending operations in March, McDonald’s drew criticism for being hesitant to stop doing business in Russia, with some advocating for a boycott.
Since Russia invaded Ukraine in February, hundreds of foreign brands have departed or ceased sales in the country, including Starbucks, Coca-Cola, Levi’s, and Apple.
Burger King and Marks and Spencer, for example, say they are unable to close outlets due to complicated franchise agreements.