(Reuters) – After the invasion of Ukraine, McDonald’s Corp. became one of the biggest global brands to leave Russia on Monday, when it announced plans to sell all of its restaurants there. It had been in Russia for more than 30 years.
After the sale, the largest burger chain in the world, which owns about 84% of its nearly 850 restaurants in Russia, will have to pay up to $1.4 billion in non-cash charges.
McDonald’s (NYSE: MCD) decided in March to close its restaurants in the country. This included the famous Pushkin Square location in the center of Moscow, which was a symbol of how American capitalism was growing as the Soviet Union was falling apart.
The burger chain was a sign of the end of the Cold War and a way for millions of people to try Western food and culture, even though the price of a burger was more than many city dwellers could spend in a day.
In a letter to employees, CEO Chris Kempczinski said, “Some might say that giving people access to food and keeping tens of thousands of people employed is surely the right thing to do.” “But the war in Ukraine has caused a humanitarian crisis that can’t be ignored.”
Even though most of the stores in Russia have closed, a few franchises have stayed open to take advantage of McDonald’s skyrocketing popularity.
Social media videos showed that there were long lines at the restaurant in Moscow’s Leningradsky Station over the weekend. It was one of the only places open in the city.
Last year, Russia and Ukraine brought in about 9%, or $2 billion, of the company’s income.
MANAGES THE TRADEMARK
McDonald’s wants to sell its restaurants to a Russian buyer, but the stores wouldn’t be able to use its name, logo, branding, or menu. This would help McDonald’s keep its trademark in Russia.
Brian Yarbrough, an analyst at Edward Jones, said that the trademark gives them the chance to get back into the market in the long run.
The company said it would make sure that its 62,000 employees in Russia would keep getting paid until any deal was done and that they would have jobs with any potential buyer.
A source close to the company in Russia said that McDonald’s restaurants are expected to start reopening under new ownership in June.
“It’s a financial win for McDonald’s, but it shows that Western companies and brands are figuring that either they can’t do business in Russia or the costs, including reputational costs, are just too high,” said Paul Musgrave, a political science professor at the University of Massachusetts.
Earlier in the day, French carmaker Renault (EPA:RENA) said it would sell its majority stake in Avtovaz to a Russian science institute. This is happening at the same time that companies are rushing to meet sanctions and deal with threats from the Kremlin that foreign-owned assets could be taken.
Analysts think that other big brands will follow McDonald’s lead. Starbucks Corporation (NASDAQ: SBUX) and Coca-Cola Company (NYSE: KO) have already ceased operations in Russia.
“I wouldn’t be surprised if other companies left the market like McDonald’s,” said Yarbrough of Edward Jones.
