The sale of McDonald’s Russia marks a first: leaving a major market

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It took McDonald’s 14 years to open its first restaurant in Russia, and it took three decades for the fast-food giant to become an integral part of Russian life in hundreds of communities across 11 time zones.

It took a war to dismantle everything.

McDonald’s didn’t just close 850 restaurants in Russia. He froze an entire 30-year investment.

Citing Vladimir Putin’s nearly three-month-long war in Ukraine – and the humanitarian crisis it has created, not to mention an unpredictable business climate – McDonald’s said on Monday it had begun a process to sell its 850 restaurants in Russia to a local buyer. Once the sale is complete, it will be the first time McDonald’s has exited a major market, the chain’s president and chief executive, Chris Kempczinski, noted in a letter Monday to franchisees, employees and suppliers.

These more than 800 restaurants will no longer carry the McDonald’s brand and will no longer be permitted to use the company’s logo or menu. McDonald’s said the company would keep its brands in Russia, even as squatters and speculators began filing requests for brand names and logos designed to mimic the iconic American brand. A McDonald’s spokesperson declined to provide a more detailed timeline for the transaction.

“This was not an easy decision, and it will not be easy to execute given the size of our business and the current challenges of operating in Russia. But the end state is clear,” Kempczinski wrote. “What makes this especially challenging is the dedication of our McDonald’s employees and suppliers in Russia, whose commitment to the brand has set a new standard for customer service in the region,” the letter said.

Russia’s first McDonald’s opened in January 1990, nearly 14 years after the idea was first floated at the 1976 Summer Olympics in Montreal. The country was still under Soviet control. On Pushkin Square in Moscow, not far from the Kremlin, the restaurant was, at the time, the largest in the chain. It covered 23,680 square feet and could accommodate 700 customers on multiple levels.

“McDonald’s built restaurants from Seattle to Singapore, but completing the first of 20 planned outlets in the Soviet Union was a triumph over the country’s endless bureaucracy and antiquated infrastructure,” a correspondent for the magazine wrote. Time about the opening.

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Because the first McDonald’s accepted rubles, the restaurant was an instant hit with Russians. Tens of thousands of people lined up to taste a “Big Mak” for the first time. The store sold “34,000 burgers on its first day, breaking the burger chain’s previous record of 9,100 first days,” reported The Moscow Times in a 30-year retrospective.

McDonald’s, however, has done more than open hundreds of restaurants in its more than three decades in Russia. He built an infrastructure and a supply chain. It has developed a workforce of over 60,000 workers to staff its restaurants. In short, the business has become a part of Russian cultural life, a fact underscored by the long lines that formed outside McDonald’s establishments on March 8, the day the chain announced it would temporarily close. its restaurants in the country.

The company invested heavily in a country known at the time for its shortages. McDonald’s brought in agronomists to help farmers grow non-native potatoes. It called on bakers from Canada, the United States and Europe to develop baking systems. The company even brought in meat experts to help Russian breeders raise cattle. In 1999, between 75 and 80 percent of the company’s raw materials “came from more than 100 local producers in Russia,” according to a 2010 report by the IBS Center for Management Research.

Kempczinski acknowledged the close relationship with the Russians in his letter.

“Russians have welcomed McDonald’s into their daily lives, their families and their friendships. McDonald’s has become an integral part of Russia, serving millions of Russians every day,” he wrote. “From Kaliningrad to Saint Petersburg, from Moscow to Nizhny Novgorod to Vladivostok, Russians have embraced McDonald’s. And we embraced Russia.

The CEO said McDonald’s will continue to pay its employees in Russia while restaurants are closed. The chain also said it will ensure that all employees have jobs with the new owner.

McDonald’s was better positioned than other fast food companies to shut down operations in Russia. Other chains rely heavily on franchisees to operate within Russian borders. McDonald’s, on the other hand, owns 84% ​​of the locations in the country. According to a company filing, McDonald’s restaurants in Ukraine and Russia accounted for 9% of the company’s revenue in 2021 because the chain has so many outlets.

As a result of its exit from Russia, McDonald’s expects to incur a charge for the business of between $1.2 billion and $1.4 billion, according to a press release on Monday.

In his letter, Kempczinski did not rule out a return to Russia, although he did not specify what would need to change for McDonald’s to return.

“So let’s not end by saying ‘goodbye,'” the CEO wrote. “Instead, let’s say like they do in Russian: До новой встречи. “Till we Meet Again.”

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