McDonald’s to sell Russian business to existing Siberian licensee
On May 16, 2022, the Kremlin’s towers are visible reflected in the windows of a Moscow McDonald’s.
Natalia Kolesnikova | AFP | Getty Images
McDonald’sIt announced Thursday that it had reached a deal with Alexander Govor, its Russian licensee on the market to sell its Russian business.
Govor will purchase all McDonald’s restaurants in Russia, and will run them under a brand new name. He agreed to keep employees on the same terms for at most two years and pay salaries to corporate workers who are located in 45 countries until the deal is closed.
The financial terms of the agreement were not disclosed.
McDonald’s said on MondayThe company expects to take a noncash loss of between $1.2 billion-$1.4 billion due to Russian net investment and currency losses.
If the regulatory approval is granted, it will be completed in the next few weeks. This marks the end for the fast food giant that first came to the country in the months prior to the collapse of the Soviet Union.
After the announcement of its intention to sell, CEO Chris Kempczinski said that McDonald’s Russia was “the very idea of glasnost” and sent a letter to McDonald’s on Monday.
McDonald’s has grown Russia’s business by 850 restaurants in the 30 years since its opening of its Moscow first restaurant. About 84% of these restaurants were owned by the company, with most remaining franchisees. While the company generates higher revenue from owning more restaurants, it is exposed to greater risks in economic crisis or turmoil.
After the Kremlin had invaded Ukraine in March, McDonald’s announced it. would temporarily shutter its Russian locations.It stated in April that $127million was lost during its first quarter due to Russia and Ukraine’s war. On Monday, the company announced it would be selling off its business.
One might think that providing access for food is sufficient to continue to provide employment to tens or thousands of citizens. Kempczinski stated in his letter that it was impossible to overlook the humanitarian crisis resulting from the conflict in Ukraine.
Some other Western businesses are looking to buy Russian companies, like Renault Automaker and the oil giant Total. Exxon Mobil.
Govor has 25 McDonald’s restaurants in Siberia. He is a licensed McDonald’s franchisee since 2015.