McDonald’s set to sell its Russian operations to an existing Siberian franchisee

McDonald’s said on Thursday that it has reached an agreement to sell its Russian company to Alexander Govor, its current licensee.

Govor will buy all McDonald’s restaurants in Russia and operate them under a new brand. He also pledged to keep staff on comparable conditions for at least two years and cover the wages of corporate employees in 45 regions of the country until the deal is completed, as well as current liabilities to suppliers, landlords, and utilities.

The deal’s financial specifics were not disclosed.

McDonald’s said on Monday that it expects to take a $1.2 billion to $1.4 billion noncash charge linked to its net investment in Russia and foreign currency losses.

If regulatory approval is obtained, the sale is likely to close in the coming weeks. It’s the end of an era for the fast-food behemoth, which arrived in the country only months before the Soviet Union disintegrated.

“In Russia, McDonald’s personified the very notion of glasnost and took on outsized significance,” CEO Chris Kempczinski wrote in a letter to the McDonald’s system on Monday, after the firm announced its intention to sell.

McDonald’s had grown its Russian business to around 850 sites in the three decades since opening its first restaurant in Moscow. About 84 percent of the restaurants were owned by the corporation, with the rest run by franchisees. The corporation makes more money by owning more restaurants, but it also exposes it to more risk during times of instability or economic collapse.

McDonald’s said in early March that it will temporarily close its Russian operations after the Kremlin invaded Ukraine. In late April, the corporation announced that the war-related suspension of its activities in Ukraine and Russia cost it $127 million in the first quarter. On Monday, it announced its intention to sell the company.

“Some could argue that continuing to employ tens of thousands of ordinary individuals while giving access to food is the correct thing to do. “However, it is hard to overlook the humanitarian situation brought on by the conflict in Ukraine,” Kempczinski wrote.

Other Western corporations, such as manufacturer Renault and oil giant Exxon Mobil, are selling their Russian operations.

Govor owns 25 McDonald’s restaurants in Siberia and has been a McDonald’s licensee since 2015.

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