McDonald's to exit Russian market
MOSCOW. May 16 (Interfax) - McDonald's Corporation , the largest chain of fast food restaurants in the world, will exit the Russian market after more than 30 years in the country.
The corporation has initiated a process to sell its Russian business, saying in a statement that it is pursuing the sale of its entire portfolio of McDonald's restaurants in Russia to a local buyer.
These restaurants will no longer use the McDonald's name, logo, branding, and menu, although the company will continue to retain its trademarks in Russia.
As a result of its exit from Russia, the company expects to record a charge, which is primarily non-cash, of approximately $1.2-1.4 billion to write off its net investment in the market and recognize significant foreign currency translation losses previously recorded in shareholders' equity. "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, nor is it consistent with McDonald's values," McDonald's said.
McDonald's said earlier that it was temporarily closing restaurants in Russia effective March 14 and pausing operations in the market, while its office in Russia remained open and employees continued to receive salaries.
McDonald's estimates monthly expenditures to ensure the fulfillment of all company obligations to employees and suppliers at $50 million.
The company recorded expenses of $127 million in Q1 as a result of suspending operations in Russia and Ukraine. This includes $27 million spent on paying employees, suppliers, and rent and a write-off of $100 million on unsold stocks.
McDonald's explained its decision to suspend operations in Russia by saying that it could not "at the moment guarantee uninterrupted work in its main areas or maintain its key product line at enterprises of the chain and the high quality standards that guests are used to."
More than 62,000 people work within the McDonald's system in Russia, and suppliers employ around 100,000.
McDonald's also said its priorities include seeking to ensure the employees of McDonald's Russia continue to be paid until the close of any transaction and that employees have future employment with any potential buyer.
McDonald's has more than 850 fast food restaurants in Russia. Most locations are independently managed by the company, although among its franchising partners are Rosinter Restaurants Holding with nine locations.
The company's Russian subsidiaries, Limited Liability Company NRO, Moscow-McDonald's, and McDonald's Limited Liability Company, saw revenue of 128.8 billion rubles in 2021, according to company data published on the SPARK-Interfax analytical system. The Russian companies sent 10.1 billion rubles for the payment of dividends to their parent structures in 2021.
McDonald's had $2.5 billion in total investments in Russia.
McDonald's opened its first restaurant in Russia on Pushkin Square in Moscow in 1990. The company names it on its website as the most visited McDonald's restaurant in the world.