McDonald’s to permanently exit Russia after 30 years

McDonald’s Corporation has announced it will permanently exit the Russian market after more than 30 years of operations in the country, and it has initiated a process to sell its Russian business.

McDonald’s said the humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, had led the company’s conclusion that continued ownership of the business in Russia is “no longer tenable, nor is it consistent with McDonald’s values.”

As part of its decision to exit, the company is pursuing the sale of its entire portfolio of McDonald’s restaurants in Russia to a local buyer.

McDonalds intends to initiate the process of “de-arching” those restaurants, meaning these sites will no longer use the McDonald’s name, logo, branding, and menu, though the company will continue to retain its trademarks in Russia.

The company said its priorities include ensuring the employees of McDonald’s Russia continue to be paid until the close of any transaction and that employees have future employment with any potential buyer.

Additionally, McDonald’s said it expects operating margin to be in the 40% range as a result of the charge for Russia. Excluding impairment and other strategic charges, it also expects adjusted operating margin to be in the mid-40% range.

This follows McDonald’s announcement on 8 March 2022 that it had temporarily closed restaurants in the country and paused operations in the Russian market.

As a result of its exit from Russia, the company expects to record a charge, which is primarily non-cash, of approximately $1.2-1.4bn (£979m-£114bn) to write off its net investment in the market and recognise “significant” foreign currency translation losses previously recorded in shareholders’ equity.

McDonald’s restaurants in Ukraine remain closed while the company continues to pay full salaries for its employees in the country and continues to support local relief efforts led by Ronald McDonald House Charities. Across Europe, the McDonald’s System is supporting Ukrainian refugees through food donations, housing and employment.

Chris Kempczinski, McDonald’s president and 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.”