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McDonald’s Corp said on Monday it had initiated a process to sell its business in Russia after 30 years of operating its restaurants in the country, following Moscow’s invasion of Ukraine.
McDonald’s in March closed all of its 850 restaurants in the country – where it says it employs 62,000 people – including its iconic Pushkin Square location. It continued to pay its staff in the country.
But on Monday it went a step further, saying in a statement: ‘After more than 30 years of operations in the country, McDonald’s Corporation announced it will exit the Russian market and has initiated a process to sell its Russian business.
The company said it would seek to have a Russian buyer hire its employees and pay them until the sale closes. It didn’t identify a prospective buyer. McDonald’s said it plans to start removing golden arches and other symbols and signs with its name.
As part of the exit, McDonald’s expects to record a non-cash charge of about $1.2 billion to $1.4 billion.
‘The humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable,’ it said.
McDonald’s Corp said on Monday it had initiated a process to sell its business in Russia after 30 years of operating its restaurants in the country, following Moscow’s invasion of Ukraine. Pictured: Customers stand in line on January 31, 1990 for the first McDonald’s to open in Russia
Pictured: The oldest of Moscow’s McDonald’s outlets, seen in March 2022. McDonald’s has now announced it is selling its Russian restaurants
Pictured: People walk next to a closed McDonald’s restaurant at a shopping mall in Moscow in March, after the company announced it would be closing its stores
Chief executive Chris Kempczinski said the ‘dedication and loyalty to McDonald’s’ of employees and hundreds of Russian suppliers made it a difficult decision to leave.
‘However, we have a commitment to our global community and must remain steadfast in our values,’ Mr Kempczinski said in a statement, ‘and our commitment to our values means that we can no longer keep the arches shining there.’
As it tries to sell its restaurants, McDonald’s said it plans to start removing golden arches and other symbols and signs with the company’s name.
It said it will keep its trademarks in Russia.
The first McDonald’s in Russia opened in the middle of Moscow more than three decades ago, shortly after the fall of the Berlin Wall.
It was a powerful symbol of the easing of Cold War tensions between the United States and Soviet Union.
McDonald’s was the first American fast food restaurant to open in the Soviet Union, which would collapse in 1991.
McDonald’s decision to leave comes as other American food and beverage giants including Coca-Cola, Pepsi and Starbucks have paused or closed operations in Russia in the face of western sanctions.
McDonald’s restaurant is seen in the center of Dmitrov, a Russian town 75 km., (47 miles) north from Moscow, Russia, on Dec. 6, 2014. In March, the Chicago-based company temporarily closed all its restaurants in Russia including its iconic Pushkin Square location, but was continuing to pay its staff
In this file photo taken on March 10, 2022, people have a lunch at a McDonald’s restaurant next to the Kremlin in Moscow. – U.S. fast-food giant McDonald’s, which closed its stores in Russia in early March, announced on May 16, 2022
Corporations from British energy giants Shell and BP to French carmaker Renault have pulled out of Russia, taking a hit to their bottom lines as they seek to sell their holdings there.
Other companies have stayed at least partially, with some facing blowback.
McDonald’s said it expects to record a charge against earnings of between 1.2 billion dollars (£980 million) and 1.4 billion dollars (£1.1 billion) over leaving Russia.
Its restaurants in Ukraine are closed, but the company said it is continuing to pay full salaries for its employees there.
McDonald’s has more than 39,000 locations across more than 100 countries.
Most are owned by franchisees – only about 5 percent are owned and operated by the company.
McDonald’s said exiting Russia will not change its forecast of adding a net 1,300 restaurants this year, which will contribute about 1.5 percent to companywide sales growth.
Last month, McDonald’s reported that it earned 1.1 billion dollars (£898 million) in the first quarter, down from more than 1.5 billion dollars (£1.2 billion) a year earlier.
Revenue was nearly 5.7 billion dollars (£4.6 billion).
On February 24, Russia’s President Vladimir Putin ordered troops into pro-Western Ukraine, triggering unprecedented Western sanctions against Russia and sparking an exodus of foreign corporations including H&M, Starbucks and Ikea.
And earlier on Monday, French automaker Renault announced it had handed over its Russian assets to the government in Moscow, marking the first major nationalization of the economic disentanglement.
Russian authorities said they were ready to nationalize foreign assets – as happened with Renault – and some officials assured Russians that their favorite brands would have domestic alternatives.
Officials in Moscow have sought to downplay the gravity of the Western sanctions, promising that Russia will adapt and take steps to stop the flight of foreign currency and capital.
The end of an era: How the closure March of McDonald’s 850 restaurants in Russia 32 years after it first launched in Moscow marks the end of the west’s engagement with post-Soviet Russia
When it first opened its doors in January 1990, 30,000 Russians who had lived under the iron fist of Soviet rule queued to get their first taste of McDonald’s Big Mac.
The fast-food giant’s first Russian outlet opened in Moscow’s Pushkin Square, and caused such excitement that some people joined the huge queue for the restaurant without knowing what it was for.
By the end of the day the store had set a new opening-day record for the company and more than 27,000 people applied for waiter jobs. Only 600 were hired.
The famous Golden Arches, which were iconic in almost every corner of the globe, had finally reached beyond the Iron Curtain and soon became a symbol of Soviet acceptance of American capitalism.
With the fall of the Berlin Wall months before and the vast Soviet Union beginning to crumble away, the McDonald’s store had became an unlikely cultural touchstone that would represent a thawing relations with the end of the Cold War.
McDonald’s announced in March that it was closing all of its outlets in Russia – including its famous original outlet following Vladimir Putin’s invasion of Ukraine.
Their move followed similar withdrawals made by Coca-Cola, Pepsi and Starbucks, plunging Russia further into international isolation – after three decades of engagement with the West.
The BBC’s Steve Rosenberg, who was in the queue at the Moscow McDonald’s when it opened said its closure was ‘hugely symbolic’.
Russian President Boris Yeltsin (right) shakes hands with a staff member at a McDonald’s restaurant in Moscow, Russia, in 1990
McDonald’s announced in March that it is temporarily closing all of its outlets in Russia – including its famous original outlet following Vladimir Putin’s invasion of Ukraine. Pictured: Queues on opening day of the Pushkin Square McDonald’s
The famous Golden Arches, which were iconic in almost every corner of the globe, had finally reached beyond the Iron Curtain and soon became a symbol of the power of American capitalism as the Soviet Union collapsed. Pictured: An elderly Soviet woman eats a hamburger at the Pushkin Square restaurant on opening day
Journalist Yuliya Chernova, who was a young child when Russia’s first McDonald’s outlet opened, recalled in March the ‘deliciousness’ of a milkshake when she tried it for the first time.
The Pushkin Square McDonald’s opened on January 31, 1990, around 18 months before the Soviet Union collapsed. It was American giant’s 11,201st store.
Pictured: A Daily Mail Comment piece from the time about the battle to bring ‘Big Mac to the Muscovites’
It had taken 13 years of negotiations before the Soviet authorities allowed the venue to open. The discussions began in 1976 and were led by George A. Cohon, the president of McDonald’s Canada.
It then cost $50million to get the operation up and running.
The restaurant chain’s most famous burger – the Big Mac – was known in Russia as the Bolshoi Mak, with bolshoi meaning ‘big’ in Russian.
The Daily Mail’s original reporting of the Pushin Square venue’s opening described how some Russians arrived before dawn in the hope of getting their hands on burgers and fries.
Such was its popularity, the queue to get in the venue ended up being more than 90 minutes long.
McDonald’s Mr Cohen said of the outlet’s opening, ‘It’s been a long, long road. It’s also been worth every drop of sweat.
‘Today is the most exciting day of my life, and I salute all those who have come along this path with me.’
One 18-year-old customer told the Daily Mail at the time: ‘I’ve seen places like this in American films but I wondered if I would ever be in one.
‘For months I’ve watched this building being prepared.’
Another added: ‘I’ll be here every week. It is already my favourite food.
Other amazed customers told the New York Times that the ‘Bolshoi Mak’ was ‘something like you’ve never tasted before.’
‘You take a bun, a very tasty bun, and you cut it in half. Then you add some grilled meat, top quality meat, mind you, not like the meat we get here,’ they said.
‘Then some cheese, then very many vitamins and then you add some spinach. And that, comrades, is the Bolshoi Mak.’
It was not only the customers who were scrambling to get through the restaurant’s doors. Of the 600 jobs that were advertised, around 27,000 applications were received.
When the venue opened, restaurants in Russia were known for their terrible hygiene, lack of menu options and poor service.
It had taken 13 years of negotiations before the Soviet authorities allowed the venue to open. The discussions began in 1976 and were led by George A. Cohon, the president of McDonald’s Canada
Such was its popularity, the queue to get in the venue ended up being more than 90 minutes long. Some passersby coming across the excitement joined the queue without even knowing what it was for
The feelings about the lack of choice were made clear by another customer, who told The Washington Post that ‘finding a decent place to eat is one of our biggest problems’.
‘This place looks different just from the outside. Everything is so clean and bright,’ they added.
However, because of the low wages of nearly all people in Russia, eating in a McDonald’s venue was a luxury, rather than the cheap option it offered in Western nations.
One customer said: ‘We certainly could not afford to eat here every day. This is a high-class restaurant by our standards.’
The Pushkin Square restaurant was welcoming to all however, with a brass sign outside declaring ‘For Soviet rubles only’ in a dig at other restaurants nearby that would cater to westerners with more easily convertible dollars or pounds.
The Pushkin Square restaurant was welcoming to all, with a brass sign outside declaring ‘For Soviet rubles only’ in a dig at other restaurants nearby that would cater to westerners with more easily convertible dollars or pounds
The famous Golden Arches, which were iconic in almost every corner of the globe, had finally reached beyond the Iron Curtain and soon became a symbol of the power of American capitalism as the Soviet Union collapsed
As the years progressed and Russia embraced capitalism, hundreds more McDonald’s outlets opened, along with those from rival fast food chains such as Pizza Hut (a few months later in 1990) and KFC (1995). Rival Burger King trailed behind with its first restaurant in 2010.
Even its ruling class welcomed their arrival, with former Soviet Union leader Mikhail Gorbachev famously appearing in a 1998 advertisement for Pizza Hut.
But in the space of a few days the slow arrival of western brands has been dramatically undone.
Led by oil giant such as BP and Shell who faced boycotts if they didn’t end their Russian partnerships, the last week has seen a wave of companies from Apple and Ikea to Volvo and Visa suspend or pull their operations.
The latest set of brands to stop services included Starbucks, Coca-Cola and Pepsi, all coming swiftly after McDonald’s.
Western sanctions and the encouragement of brands to temporarily leave Russia will make it clear to regular Russians that the Ukrainian invasion comes with a high price, even if the true cost is somewhat hidden by state media.
McDonald’s has pledged to continue supporting its 62,000 staff in Russia with full salaries, and have said the lights on the golden arches will only be going off ‘temporarily’.
‘For 66 years, we have operated with the belief that communities are made better when there’s a McDonald’s nearby,’ McDonald’s CEO Chris Kempczinski said in a statement.
Now for millions in Russia, it is unclear for how long this will not be the case.