McDonald’s and Starbucks are temporarily closing all restaurants in Russia

McDonald’s and Starbucks are temporarily closing all restaurants in Russia

McDonald’s and Starbucks are closing all their branches in Russia, joining the exodus of Western brands that followed Vladimir Putin’s invasion of Ukraine.

When the first McDonald’s opened in Moscow in January 1990, it was considered one of the landmarks of the end of the Soviet Union, with over 30,000 people standing in line to buy a hamburger. However, on Tuesday, McDonald’s said it would temporarily close all of its 850 restaurants in Russia and suspend other operations in the country.

Hours later, Starbucks said a local licensee operating its 130 cafes in Russia would also immediately “pause” work. The American cafe chain said last week that the branches will remain open, but that they will donate their honorarium to humanitarian aid to Ukraine.

Russia and Ukraine together accounted for about 9 percent of McDonald’s revenue last year, or more than $ 2 billion. These two markets contributed less than 3 percent of the burger group’s operating revenue, as fully owned restaurants, such as those found in both countries, are less profitable than franchising.

Chris Kempczinski, CEO of McDonald’s, told employees and franchisees that it was “impossible to predict” when McDonald’s will be able to reopen its locations in Russia. The company has had supply chain disruptions as a result of the conflict and will continue to monitor the “humanitarian situation” in the region, he added.

The Chicago-based hamburger chain has already closed its 100 or so McDonald’s restaurants in Ukraine.

McDonald’s is the last in a series of companies to halt its business in Russia, but Golden Bows has stood out as one of the American brands that has become a symbol of the post-Soviet era.

Earlier this week, Levi Strauss – whose blue jeans were in demand on the black market in Soviet Russia – also said he would suspend commercial operations in Russia.

In his letter Tuesday, Kempczinski said the situation was “extremely challenging” for a global brand such as McDonald’s.

“We have been working for 66 years with the belief that communities are better off when McDonald’s is nearby,” he wrote, adding that the fast food chain employs 62,000 people in Russia and serves millions of customers every day.

“At the same time, our values ​​mean that we cannot ignore the unnecessary human suffering that is taking place in Ukraine,” Kempczynski said in a letter to employees and users of the franchise.

McDonald’s will continue to pay its employees in Russia, he said. Kevin Johnson, the executive director of Starbucks, said that it would “provide support” for almost 2,000 people in Russia who depend on Starbucks for their lives.

Consumer brands have diverged in their response to the Russian invasion of Ukraine as they struggle to respond to growing pressure from Western employees, consumers and investors as they do the right thing for their Russian workers and customers.

Yum Brands, owner of Pizza Hut and KFC, said on Tuesday that it would pause investment in new restaurants in the country and redirect all profits from its existing operations there to humanitarian efforts while assessing possible further changes. Almost all 1,000 KFC restaurants and 50 Pizza Hut locations are operated by franchisees.

Last Friday, the $ 280 billion New York State Joint Pension Fund called on McDonald’s and other companies, including PepsiCo, to consider withdrawing from Russia in response to the crisis.

The fund, which owns about $ 410 million of McDonald’s shares, said ending its business in Russia would “address various investment risks associated with the Russian market and play an important role in condemning Russia’s role in fundamentally undermining a vital international order.” for a strong and healthy global economy. ”

Shares of McDonald’s, which have fallen 13 percent in the past month, rose slightly in afternoon trading in New York. Shares of Starbucks, which fell 10 percent last month, have also changed little.

Additional reporting by Polina Ivanova from London



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