McDonald’s announced on Monday that the American fast-food chain has decided to exit the Russian market and has begun the course of action to sell off its Russian business after halting operations in March after Russia attacked Ukraine.
McDonald’s has concluded that ongoing ownership of the firm in Russia is no longer feasible, and is inconsistent with McDonald’s values, due to the humanitarian situation produced by the war in Ukraine and the resulting unstable operating environment.
McDonald’s is selling its entire portfolio of McDonald’s restaurants in Russia to a local buyer as part of its intention to withdraw.
The fast-food chain is to begin the practice of “de-Arching” those businesses, which means no longer utilising the McDonald’s name, logo, branding, or menu, though the company’s trademarks in Russia will be retained.
The group’s goals include ensuring that McDonald’s Russia employees are paid until the transaction is completed and that they have future employment.
Chris Kempczinski, McDonald’s Chief Executive Officer, said, “We have a long history of establishing deep, local roots wherever the Arches shine.”
“We’re exceptionally proud of the 62,000 employees who work in our restaurants, along with the hundreds of Russian suppliers who support our business, and our local franchisees. Their dedication and loyalty to McDonald’s make today’s announcement extremely difficult.”
“However, we have a commitment to our global community and must remain steadfast in our values. And our commitment to our values means that we can no longer keep the Arches shining there.”
Throughout the Ukraine crisis, McDonald’s has continued to pay their employees and provide support through food donations, housing and employment.
The company intends to record a charge of about $1.2-1.4bn to write off its net investment in the market and recognise large foreign currency translation losses previously recorded in shareholders’ equity as a result of its exit from Russia.
McDonald’s Outlook
McDonald’s reassures investors on its 2022 outlook and said that it forecasts the charge for Russia will impact operating margin leading it to be in the 40% range.
Ignoring the impact of closing its restaurants in Russia, the group expects over 1,300 net restaurant additions in 2022 which will contribute about 1.5% to 2022 Systemwide sales growth in constant currencies.
The group said it predicts capital expenditure to be roughly $2.1-2.3bn.