McDonald’s to sell its Russian business over Ukraine war

McDonald’s is to sell its Russian business, two months after temporarily closing its restaurants in the country as part of the exodus of western companies in response to the invasion of Ukraine.

The fast-food chain, which operated 850 restaurants in Russia and employed 62,000 people, said on Monday that remaining in the country was not “consistent with McDonald’s values” following President Vladimir Putin’s invasion.

“The humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable,” McDonald’s said in a statement.

The Chicago-based company said it expected to book a non-cash charge of $1.2bn to $1.4bn after the first exit from a major market in its history.

It said on Monday that it wanted a local buyer to hire its employees, but that its restaurants in the country would no longer carry the McDonald’s name or serve its menu.

“The Golden Arches [logo] will shine no more in Russia,” chief executive Chris Kempczinski said in a note to employees.

The company had told analysts late last month that it was spending about $55mn a month to continue paying rent and wages while its operations in Russia were suspended.

The group is one of hundreds of multinationals that suspended operations in Russia in the early days of the war. At the time, it had “held out hope for peace to soon return to the region”, Kempczinski told employees on Monday.

The Russian branch of McDonald’s plans to relaunch in June under a new brand once a deal to sell the company is completed, according to a person familiar with the matter.

McDonald’s Russian management will remain unchanged, as will the restaurants’ menu — which has included local specialities such as bliny and a Beef à la Russe burger on a black bread bun — and network of local suppliers, the person said.

The decision would allow the company to save “tens of thousands” of corporate jobs, stop its suppliers from going out of business and permit franchisees, who operate over 100 of McDonald’s Russian restaurants, to join the brand, they added.

Advisors and analysts have been expecting more western companies to pull out altogether as the war extends, but said such moves have been delayed by the complexities of finding unsanctioned buyers for their Russian assets and then repatriating any sale proceeds.

The fast food industry’s franchise model has also complicated efforts to leave Russia.

Burger King said in March that its Russian partner “refused” to shut down its more than 800 restaurants in the country, while some of McDonald’s franchisees also continued to operate.

Several Russian entrepreneurs have announced plans to create ersatz replacements for departing western brands.

Moscow announced Rbs500mn ($7.8mn) in loan financing for new fast food restaurants in March, while former president Dmitry Medvedev suggested oligarchs under western sanctions could get involved in “making buns and cutlets” after losing access to global financial markets.

The two former McDonald’s restaurants in the Donetsk People’s Republic, a Moscow-backed separatist territory in eastern Ukraine, operate as DonMak with an almost identical menu and brand.

Russian drinks maker Ochakovo, best known for its kvass, a beverage made from fermented brown bread, launched new sodas on Monday named CoolCola, Fancy and Street in designs closely aping those used by Pepsi, Fanta and Sprite.

Coca-Cola, which makes the latter two drinks, and Pepsi both suspended operations in Russia in March.

McDonald’s decision on what to do in Russia has been closely watched both because of the high number of employees it had and because of the symbolism of its presence in the country.

The US fast-food group opened its first Russian restaurant in Moscow in 1990, when the introduction of a well-known western chain and the hours-long lines to eat there was seen as one of the markers of the end of the Soviet Union.

In a note to staff, Kempczinski said on Monday that the company’s presence in Russia had inspired the notions of “burger diplomacy” and a “McDonald’s peace theory”, which held that no two countries with Big Macs would go to war with each other.

“McDonald’s in Russia embodied the very notion of glasnost,” he said.

Kempczinski added that he had asked himself whether McDonald’s was legally allowed to operate in the country, whether it had the freedom to operate unimpeded, whether remaining in Russia enhanced its global brand and whether it made business sense.

“Unfortunately, the answer to each of these questions is currently no — and I don’t see that changing for the foreseeable future,” he said.

Despite arguments that it was right to continue feeding ordinary citizens, he added, “our commitment to our values means that we can no longer keep the arches shining [in Russia]”.

The company held open the prospect of returning to the country, with Kempczinski ending his note with the words: “Until we meet again”.

Some companies, notably Renault, have structured the sales of their Russian operations so they have an option to buy the assets back in future.

Additional reporting by Nastassia Astrasheuskaya in Riga