McDonald’s will close its doors in Russia after 30 years

McDonald’s Corp became one of the biggest global companies to depart Russia on Monday, announcing intentions to sell all of its restaurants after operating in the nation for more than 30 years.

Following the sale, the world’s largest burger chain, which owns around 84 percent of its almost 850 outlets in Russia, will suffer a corresponding non-cash loss of up to $1.4 billion.

McDonald’s said in March that it would close all of its restaurants in Russia, including the landmark Pushkin Square facility in central Moscow, a symbol of blooming American capitalism among the fading embers of the Soviet Union.

The burger company symbolized the easing of Cold War tensions. It provided a vehicle for millions of people to experience Western cuisine and culture, although the cost of a burger was many times greater than many city inhabitants’ daily expenses.

“Some could argue that continuing to employ tens of thousands of ordinary citizens while providing access to food is clearly the correct thing to do,” Chief Executive Chris Kempczinski wrote in a statement to staff. “However, ignoring the humanitarian issue is untenable.”

Though most restaurants in Russia have closed, a few franchised locations have remained operating, capitalizing on McDonald’s skyrocketing popularity.

Long lines were visible on social media over the weekend at the restaurant in Moscow’s Leningradsky Station, one of the capital’s few open outlets.

Last year, Russia and Ukraine accounted for around 9% of the company’s sales, or $2 billion.

TRADEMARK REMAINS

McDonald’s is trying to sell its restaurants to a local buyer and would not allow the outlets to use the company’s name, logo, branding, or menu, keeping its trademark in Russia.

“It (the trademark) offers them the opportunity to re-enter the market in the long run,” Edward Jones analyst Brian Yarbrough said.

The firm stated that its 62,000 employees in Russia would be paid until the acquisition was completed and that they would have future employment with any possible buyer.

According to a source close to the firm, McDonald’s outlets in Russia are likely to reopen in June under new ownership.

“It is a financial hit for McDonald’s, but it demonstrates that Western companies and brands are calculating that either they cannot do business in Russia or the costs, including reputational costs, are simply too high,” said Paul Musgrave, a political science professor at the University of Massachusetts.

Analysts predict that other major brands will follow McDonald’s lead. Starbucks Corporation and Coca-Cola Company have previously suspended operations in Russia.

“I wouldn’t be shocked if additional corporations followed McDonald’s lead and exited the market,” said Edward Jones’ Yarbrough.