McDonald’s to leave Russia 32 years after historic entry

RUSSIA – American multinational fast food corporation McDonald’s is exiting the Russian market bringing an end to a stint that commenced 32 years ago when the company first set foot in the former Soviet Union.

When McDonald’s came to Russia in the 1990s, it was an iconic moment. Tens of thousands of people stood in long lines to get their first taste of a “Big Mak.”

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The store located on Pushkin Square in Moscow sold “34,000 burgers on its first day, smashing the burger chain’s previous first-day record of 9,100,” the Moscow Times reported.

This was the first foray of the American fast-food chain in Russia and came after 14 years of intense lobbying by McDonald’s executives seeking to open their first restaurant in Russia.

Three decades later, the fast-food giant has grown to become an integral part of Russian life in hundreds of communities across 11 time zones.

During the 32-year period, the fast-food chain has built an infrastructure and a supply chain that boasts 850 stores and a workforce of more than 60,000 workers.

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The ongoing war between Russia and its neighbor Ukraine has however made it untenable for the company to continue doing business in the Federation and thus the decision to leave.

“We have a long history of establishing deep, local roots wherever the arches shine,” said Chris Kempczinski, president and chief executive officer.

“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.”

Last month the company said it was losing US$55 million per month, and US$100 million worth of inventory, due to restaurant closures. It has also closed 108 restaurants in Ukraine while continuing to pay employees in that country.

The San Bernardino, California headquartered company is currently pursuing the sale of its entire portfolio of restaurants in the country to a local buyer.

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The company intends to initiate the process of “de-arching” those restaurants, which entails no longer using the McDonald’s name, logo, branding, and menu, though the company will continue to retain its trademarks in Russia.

Management said its priorities include seeking to ensure 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.

As a result of its exit from Russia, McDonald’s expects to record a charge, which will be primarily non-cash, of approximately US$1.2 billion to US$1.4 billion as it writes off its net investment in the market and recognizes significant foreign currency translation losses.

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