McDonald’s Russian shutdown will cost fast-food chain $50 million a month
St. Petersburg, Russia: A McDonald’s Restaurant
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Chicago-based Company announced Tuesday that it will temporarily shut down its Russian operations as Putin’s forces continue their attacks on Ukraine. There are approximately 850 McDonald’s locations across Russia. The majority are franchisees and owned by McDonald’s.
Other U.S. restaurant companiesIncludes Starbucks, Yum BrandsAnd Papa John’sFollowed McDonald’s and its soda supplier’s footsteps Coca-Cola. McDonald’s in Russia and Ukraine is company-owned so it has more exposure than any other U.S. fast food chain with outlets in these markets. It was criticised for its silence on the matter until it finally announced closures.
At the UBS Global Consumer and Retail Conference, Kevin Ozan, McDonald’s Chief Financial Officer stated that they are still working out the effects on their business. The company estimates it will cost $50 million each month or approximately 5 to 6 cents per Share. For comparison, McDonald’s reported fourth-quarter net incomeEarnings per share: $2.18
McDonald’s has pledged to pay all 62,000 Russian workers during the temporary halt in restaurant operation. Ozan stated that McDonald’s would also pay leases on its restaurants, and supply chain costs.
Ozan explained that “we expect it to be temporary” and that they don’t take the decision lightly. However, for them, the goal is to do what is best for their local community and global business.
Russia’s McDonald’s is a symbol of American success. In Moscow 32 years ago, the chain opened its first Soviet Union restaurant. It did so months before the Soviet Union collapsed.
McDonald’s also closed its Russian restaurants temporarily and has shuttered the 108 Ukrainian McDonald’s for now. Russia and Ukraine collectively account for 2% of McDonald’s global sales and approximately 9% of the company’s revenue.
Starbucks announced Tuesday that Russia could be halted and its licensee had committed to temporarily closing all its stores. Starbucks will continue to pay its 2,200 Russian employees while it closes its cafes. Starbucks CEO Kevin Johnson condemned Russia’s invasion on Friday.
Yum said it would suspend operations at all KFC restaurants owned by the company in Russia. It is also finalizing an arrangement with its Russian master franchisor to put a halt to all Pizza Hut franchise operations. It already stated that it will suspend Russian investment as well as new restaurant development. Franchisees operate nearly all the Yum Russian restaurants, which number approximately 1,050.
Papa John’s also announced Wednesday that they have suspended all corporate operations within Russia. There, a master franchisee oversees operations and controls the supply chain. According to Papa John’s, the franchisees aren’t paying any royalties at this time.