McDonald’s to exit Russia, sell business in country

American fast-food giant McDonald’s said Monday it will exit Russia in the wake of the Ukraine invasion, ending a more than three-decade run begun in the hopeful period near the end of the Cold War.

The restaurant chain, which launched in Moscow in January 1990 to great fanfare almost two years before the Soviet Union was dissolved, characterised the withdrawal as difficult but necessary.

“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,” the company said in a statement.

The chain is looking to sell “its entire portfolio of McDonald’s restaurants in Russia to a local buyer.”

The burger giant is one of numerous foreign firms that have pulled out of the country or suspended operations following Moscow’s invasion of Ukraine in late February.

Earlier on Monday, French automaker Renault announced it had handed over its Russian assets to the government, marking the first major nationalisation since the onset of Western sanctions against Moscow’s military campaign.

Russia’s President Vladimir Putin ordered troops into pro-Western Ukraine on Feb 24, triggering unprecedented sanctions and sparking an exodus of foreign corporations including H&M, Starbucks and Ikea.

In March, citing “unspeakable suffering to innocent people,” McDonald’s closed all of its 850 restaurants in the country, where it says it employs 62,000 workers.

But on Monday the “Big Mac” maker went a step further, saying the company “is pursuing the sale of its entire portfolio of McDonald’s restaurants in Russia to a local buyer.”

After the sale, the restaurants would no longer be able to use the McDonald’s name, logo, branding or menu, though the company will retain its trademark in the country, it said.

Russia currently accounts for 9% of the company’s revenue and 3% of its operating profit.

McDonald’s expects a one-time charge of US$1.2 billion to US$1.4 billion to write off the investment.

A ‘new era’

The withdrawal offers a stark contrast to the optimism that surrounded the arrival of the quintessentially American brand in Russia in the waning days of the Cold War.

The company began discussing Russian business at the 1976 Olympics in Canada where McDonald’s let Russian athletes use the “Big Mac Bus” in a sign of good will.

That led to 14 years of negotiations, “culminating in the glorious day in January of 1990 when the first McDonald’s opened to so much hope and excitement in Pushkin Square,” recalled McDonald’s chief executive Chris Kempczinski in a message to employees.

“In the history of McDonald’s, it was one of our proudest and most exciting milestones,” Kempczinski said. “After nearly half a century of Cold War animosity, the image of the Golden Arches shining above Pushkin Square heralded for many, on both sides of the Iron Curtain, the beginning of a new era.”

In the subsequent decades, McDonald’s operations in Russia expanded far beyond Moscow as the company invested billions of dollars and grew its supply chain.

But Kempczinski said the Russia investment was no longer viable in terms of business, or consistent with company values.

Still, he closed his message on a hopeful note, saying, “let us not end by saying, ‘goodbye’… (but) ‘Until we meet again.'”

The company’s decision to divest “underlines a view that relations with Russia will not soon be normalised,” said Neil Saunders, a retail expert at GlobalData.

The conditions of the exit, including the financial challenges facing prospective Russian buyers means “it is unlikely the sale price will be anywhere near the pre-invasion book value of the business,” said Saunders, adding that the departure “will leave a hole” in McDonald’s growth plans “that is not easily filled in the near-term.”

Shares of McDonald’s fell 0.4% to US$244.04.