McDonald’s, Starbucks to close Russian locations

AP
AP

Summary

  • McDonald’s has about 850 locations in Russia; Burger King, KFC-owner Yum Brands continue to operate through franchises

McDonald’s Corp. and Starbucks Corp. said Tuesday they are suspending operations at Russia locations, as U.S. restaurant companies face calls from investors and consumers to reassess ties with the country.

McDonald’s said that it is temporarily closing its 847 restaurants in Russia in light of Russia’s invasion of Ukraine, while continuing to pay the 62,000 people the company employs there. Starbucks said that it is suspending shipment of its products to Russia, while the licensee that runs its 130 chain stores in the country will immediately stop operating.

The chief executives of McDonald’s and Starbucks told employees in separate messages Tuesday that the moves were motivated by the invasion of Ukraine. U.S. companies have been reassessing their operations in Russia after Western governments sanctioned Russia in response to its military action, and financial firms acted to sever Russia from global markets.

The restaurant companies’ moves halt operations that have generated years of sales, serving millions of customers daily in a food-service market estimated to be worth billions of dollars. The suspensions are also a symbolic gesture by global brands that have in recent decades represented the opening of the Russian economy to Western-style business and products.

Russia’s invasion of Ukraine last month has built pressure on restaurant operators to follow steps by other major companies, including Apple Inc., Boeing Co. and BP PLC, to reconsider their Russian ties. Since the invasion began, more than 250 U.S. technology firms, manufacturers and other companies have announced their withdrawal from Russia, according to the Yale School of Management.

New York State Comptroller Thomas P. DiNapoli, who oversees the state’s public pension fund investments including McDonald’s shares, had called on the company to review its Russian business to serve the best interests of the company and its shareholders, among them the New York State Common Retirement Fund. Online petitions have circulated on social media in recent days, calling for McDonald’s and other U.S. restaurant chains to pull out of Russia.

McDonald’s owns and operates 84% of its restaurants in Russia, with the rest run by franchisees, the chain said. It said that both company and franchised restaurants will temporarily shut down in the country. McDonald’s said it couldn’t yet tell when it might reopen the restaurants and would consider whether additional steps might be required.

Russia and Ukraine accounted for around 9% of McDonald’s revenue last year, the company said, given the high percentage of company-owned restaurants in those markets. The countries accounted for 2% of overall sales, and less than 3% of operating income, the chain said.

McDonald’s also owns and operates 108 restaurants in Ukraine, along with corporate offices, employing nearly 10,000 people. Those locations are closed, and the company is working to maintain its payroll system in the country to keep paying employees, McDonald’s said in an internal message last week.

Starbucks didn’t specify when its Russia operations might restart.

Other American restaurant chains are continuing some of their operations in Russia. A Yum! Brands Inc. spokeswoman said Tuesday that the company was suspending all investment and restaurant development in Russia, and that it was temporarily closing its 70 company-owned KFC locations and signing an agreement with its Pizza Hut franchisee to halt business at its 50 locations. The company has around 1,000 KFC restaurants in Russia, nearly all of which are operated by independent owners under license or franchise agreements and will continue to operate, Yum said.

A Restaurant Brands International Inc. spokeswoman said the company’s more than 800 Burger King restaurants remain open in Russia, as they are stand-alone businesses owned and operated by local franchisees. “We have longstanding legal agreements that are not easily changeable in the foreseeable future," she said.

In recent days, calls to boycott McDonald’s, Starbucks and other chains still operating in Russia have grown on social media. Oksana Yakushko, a Santa Barbara, Calif.-based psychologist who is Ukrainian, said she started Change.org petitions calling for Starbucks and McDonald’s to close their Russian locations because they struck her as more tangible than sanctions.

“Russia and Russians should not stay unaware or afraid to take responsibility for this war," said Ms. Yakushko, who said her immediate family had just escaped Ukraine, though other relatives remain.

Some past efforts to pull back in response to geopolitical tensions have drawn rebukes from the Russian government.

In 2014, amid rising tension over Russia’s annexation of Ukraine’s Crimea region, McDonald’s closed a handful of restaurants operating there. In subsequent days, Russia’s consumer regulator began shutting down or inspecting McDonald’s restaurant locations, including the country’s iconic first McDonald’s restaurant that opened in Pushkin Square in 1990. The closures were temporary.

McDonald’s first began eyeing the Russian market in the late 1970s, and it took repeated discussions with government officials to provide food for the 1980 Moscow Olympics and, later, open restaurants in the country.

Running restaurants there involved extensive approvals from the Russian government. Some of McDonald’s Russian locations eventually became among the chain’s top-performing stores.

Pizza Hut, then owned by PepsiCo. Inc., entered Russia soon after the first McDonald’s opened. An advertisement starring former Soviet Union leader Mikhail Gorbachev dishing up pizza in one of the chain’s Moscow restaurants aired internationally in 1998, and came to symbolize Russia’s opening up to capitalism.

This story has been published from a wire agency feed without modifications to the text

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