Russia-Ukraine War Effect- McDonald's Chooses to Leave Russia for Good After 30 years

Mcdonald's has decided to leave Russia permanently after over 30 years in the country and has begun the process of selling its restaurants. This move came months after it closed 850 restaurants in Russia this March.

This decision was made due to the humanitarian crisis and the unpredictable operating environment due to the Russia-Ukraine war that has been going on for a while now.

The first time a McDonald's outlet was opened in Russia was in 1990. It symbolized a thaw in the Cold War tensions. After a year, the Soviet Union collapsed, and Russia started to open up its economy to more and more companies that belonged to the West.

McDonald's Chief Executive Chris Kempczinski shared a message with staff and suppliers. He said, "This is a complicated issue that's without precedent and with profound consequences. Some might argue that providing access to food and continuing to employ tens of thousands of ordinary citizens, is surely the right thing to do."

He added, "But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine. And it is impossible to imagine the Golden Arches representing the same hope and promise that led us to enter the Russian market 32 years ago."

Mcdonald's stated that it will sell all the sites in Russia to a local buyer and would initiate the process of de-arching the restaurants. It involves removing its name, menu, and brand from the country. However, the company plans to retain its trademarks in Russia.

The brand also stated that it is prioritizing ensuring that its 62,000 employees in Russia continue to get payments until the same was completed and they had "future employment with any potential buyer."

McDonald's will write off a charge of USD 1.4 billion to cover the exit from its investment.

The chain has already closed 108 restaurants in Ukraine and has continued to pay its employees there.

The Wave

Interestingly, Mcdonald's is not the only western chain that has decided to extricate itself from Russia. Many other western companies and brands are doing the same. Their bottom lines are taking a hit due to a pause or closure of operations in Russia in the face of sanctions and threats from the Kremlin that foreign-owned assets may be seized. Still, some brands have decided to stay in the country.

On Monday, French carmaker Renault stated that it would sell its majority stake in the Russian car company Avtovaz and a factory in Moscow to the state. If that happens, it will be the first major nationalization of a foreign business since the war between Russia and Ukraine began.

The Pressure

Maxim Sytch, a professor of management and organizations at the University of Michigan's Ross School of Business, believes that McDonald's and other brands face pressure from customers, employees, and investors regarding their Russian operations.

He said, "The era where companies could avoid taking a stance is over. People want to be associated with companies that do the right thing. There's much more to business ---- and life ---- than maximizing profit margins."


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