McDonald’s, one of the most iconic American fast food brands, made headlines in March 2022 when it decided to temporarily close all of its restaurants in Russia. This move came in response to Russia’s invasion of Ukraine, and was seen as a bold political statement by one of the world’s largest restaurant chains. But what exactly prompted McDonald’s to take such drastic action, and what has been the impact of its departure from the Russian market? Here we’ll explore the reasons behind McDonald’s exit, and what it reveals about global companies operating in complicated political contexts.
When did McDonald’s leave Russia?
On March 8, 2022, McDonald’s announced that it would temporarily close all of its company-owned Russian restaurants. At the time, this included around 850 locations in Russia employing 62,000 workers. Just two weeks later, on March 23, McDonald’s took its exit one step further, communicating that it would sell its Russian business and seek to permanently leave the market. The fast food giant stated that its priority was no longer doing business in Russia, but instead supporting its employees and contributing humanitarian aid to refugees.
Why did McDonald’s decide to leave Russia?
McDonald’s gave two main reasons for suspending operations in Russia:
- Conflict in Ukraine – McDonald’s cited the “needless human suffering” occurring in Ukraine as a result of Russia’s invasion as a key factor in its decision.
- Supply chain disruptions – With much of its supply chain disrupted, McDonald’s said it could no longer serve customers with its usual high standards in Russia.
However, many observers noted the strong political symbolism of an iconic American brand turning its back on Russia. McDonald’s had opened its first restaurant in Moscow in 1990, just before the collapse of the Soviet Union. Its arrival was seen as a watershed moment, bringing American fast food culture to the communist bloc. By leaving Russia, McDonald’s was making a values-based decision to distance itself from association with the Russian regime and its policies.
How did Russians react to McDonald’s departure?
Initial reaction to McDonald’s withdrawal from Russia was very mixed. Some Russians lamented the loss of their favorite American fast food. Polls in March 2022 found that 61% of Russians were unhappy to see McDonald’s leave. However, Russian state media and politicians condemned the move as an offensive “Russophobic” response driven by stereotypes. The Russian government insisted that domestic alternatives would replace McDonald’s very soon.
In the following months, the attitude among many Russians toward McDonald’s departure turned more negative. One survey in July 2022 found that 40% of Russians supported bringing McDonald’s back, while 26% opposed its return. Yet with severe economic instability and shortages of goods in Russia as sanctions bit down, hostility toward Western brands was still evident. This was especially true after McDonald’s announced its full exit from the Russian market in May and sold to a Russian buyer, which many viewed as the end of an era.
How did McDonald’s Russian exit unfold?
McDonald’s full departure from Russia occurred in several stages:
- March 8 – Temporary closure of 850+ McDonald’s owned restaurants announced
- March 23 – McDonald’s confirms it will fully exit Russia and seek a local buyer
- May 16 – McDonald’s sells Russian restaurants to Russian buyer Alexander Govor after 32 years of operating in Russia
- June 12-13 – McDonald’s restaurants begin reopening under new Russian ownership and “Vkusno & tochka” brand
The process highlighted the complexity of a major international company disentangling itself quickly from a large foreign market in response to geopolitical events. Winding down operations took over three months, and involved negotiating terms to hand over restaurants to a local buyer.
How much did McDonald’s Russian exit cost?
McDonald’s took a significant earnings hit from its decision to leave Russia. In the first quarter of 2022, McDonald’s recorded $127 million in costs tied to suspending operations in Russia and Ukraine. This included $27 million in employee salaries, lease and supplier expenses and $100 million in non-cash charges from writing off the value of Russian assets.
In total, the fast food chain forecast the Russia exit would cost around $1.2 to $1.4 billion in 2022. This highlights the difficult trade-off global brands face when weighing up taking a political stand in their business decisions.
Who bought McDonald’s Russian business?
McDonald’s sold its entire Russian portfolio of around 850 restaurants to Russian businessman Alexander Govor in May 2022. Govor is a businessman based in Siberia who had previously operated 25 McDonald’s locations. The sale price was not officially disclosed, but was estimated at a symbolic total of around $12-$14 million – far less than the assets were worth.
Govor rebranded the McDonald’s locations as “Vkusno & tochka” which translates as “Tasty and that’s it”. The brand’s logo uses the same color scheme and typography as McDonald’s. McDonald’s intellectual property like the name and logos were retained by McDonald’s Corporation in the sale agreement.
Did McDonald’s employees keep their jobs?
A key priority for McDonald’s was negotiating a sale deal in Russia that protected its 62,000 employees. Under the terms agreed with Govor, McDonald’s Russian staff kept their jobs with equivalent salaries for at least two years. Reports indicated that former McDonald’s employees would end up doing similar roles, including cooks, waiting staff, managers and administrative roles.
Protecting workers aligned with McDonald’s values and also avoided backlash over abandoning Russian livelihoods. However, the jobs are unlikely to be as stable in the long run after the McDonald’s transition.
How successful was the new Russian fast food brand?
The launch of Vkusno & tochka in June 2022 was relatively smooth, helped by retaining experienced McDonald’s staff. By early July over 50 locations had reopened in Moscow and St Petersburg, serving almost 50,000 customers per day. The menu remained very similar to McDonald’s, though some items like the Filet-O-Fish were rebranded.
However, supplies of ingredients like fries and ice cream have faced disruption without being able to import from Western suppliers. Prices have increased significantly too due to high inflation in Russia. Despite these challenges, the brand has established itself as Russia’s replacement for McDonald’s in a relatively short space of time.
What was the long term impact on McDonald’s business?
Despite the high costs, McDonald’s Russian exit may not significantly damage the business long term:
- Russia accounted for only around 9% of McDonald’s revenue and 3% of operating income.
- Losing the Russian market frees up resources to expand in other countries like China which offers bigger growth opportunities.
- Taking a stand against Russia’s actions built goodwill with customers and stakeholders in other markets.
However, it does set a precedent that geopolitical instability can force companies to withdraw from markets at high cost. This may influence future investment decisions in certain regions.
Could McDonald’s return to Russia in future?
McDonald’s has stated it has no plans to return to Russia in the foreseeable future. Disentangling itself from the market suggests McDonald’s believes Russia no longer aligns with its values and brand. Unless the geopolitical situation changes significantly, a return seems unlikely.
Even if it wanted to return, the sale agreement means McDonald’s can’t reopen restaurants in Russia under its own brand for 15 years. While McDonald’s could return under a different brand name, the separation looks set to be permanent for now.
Conclusion
McDonald’s decision to fully exit Russia in 2022 was complex and costly, but revealed how seriously global brands are taking political factors in business decisions today. For McDonald’s, upholding its values amid a major international conflict ultimately took priority over profits in Russia. The saga provides an important case study in brands navigating nationalism and tensions between countries. While the exit was not without challenges, McDonald’s achieved its aim of separating itself from association with Russia, and took a stand that earned praise in much of the Western world.
