McDonald’s to sell Russian business to existing Siberian licensee

Kremlin towers and passers-by are reflected in the window of a closed McDonald’s restaurant in Moscow on May 16, 2022.

Natalia Kolesnikova | AFP | Getty Images

McDonald’s announced Thursday that it has reached an agreement to sell its Russian business to Alexander Govor, its current market licensee.

Govor will acquire all McDonald’s locations in Russia and operate them under a new brand. He also agreed to retain the employees for at least two years, on equivalent terms, and to fund the salaries of the company’s employees who work in 45 regions of the country until the conclusion of the agreement and the existing obligations. to suppliers, owners and utilities.

Financial terms of the deal were not disclosed.

McDonald’s said on Monday it expects to take a non-cash charge of $1.2 billion to $1.4 billion related to its net investment in Russia and foreign exchange losses.

The sale is expected to close within the next few weeks if it receives regulatory approval. It marks the end of an era for the fast-food giant, which first entered the country just months before the dissolution of the Soviet Union.

“McDonald’s in Russia has embodied the very notion of glasnost and grown out of proportion,” CEO Chris Kempczinski wrote in a letter to the McDonald’s system on Monday after the company announced its intention to sell.

In the three decades since opening its first location in Moscow, McDonald’s has grown its Russian business to approximately 850 locations. The company owned about 84% of these restaurants, while the rest were operated by franchisees. Owning more of its restaurants generates greater revenue for the company, but exposes it to greater risk in times of turmoil or economic downturn.

In early March, after the Kremlin invaded Ukraine, McDonald’s announced that it would temporarily close its Russian sites. The company said in late April that the suspension of its operations in Ukraine and Russia due to war cost it $127 million in the first quarter. And on Monday he revealed he plans to sell the business.

“Some might argue that providing access to food and continuing to employ tens of thousands of ordinary citizens is certainly the right thing to do. But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine,” said Kempczinski in his letter. .

Other Western companies are also choosing to sell their Russian operations, including carmaker Renault and oil giant Exxon Mobil.

Govor operates 25 McDonald’s locations in Siberia and has licensed the fast food chain since 2015.

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