The towers of the Kremlin and passers-by are reflected in the window of a closed McDonald’s restaurant in Moscow, Russia, May 16, 2022.
Natalia Kolesnikova | AFP | Getty Images
McDonald’s announced Thursday that it has reached an agreement to sell its Russian business to its current licensee in the market, Alexander Govor.
Govor will acquire all McDonald’s stores in Russia and operate under a new brand. He also agreed to retain employees on equal terms for a minimum of two years and to fund the salaries of company employees working in 45 regions of the country until the transaction closes, as well as existing liabilities to suppliers, landlords and utilities.
Financial terms of the deal were not disclosed.
McDonald’s said Monday it expects to record a non-cash charge of $1.2 billion to $1.4 billion related to its net investment in Russia and foreign currency losses.
The sale is expected to close in the coming weeks, subject to receiving regulatory approval. It marks the end of an era for the fast-food giant, which arrived just months before the Soviet Union dissolved.
“McDonald’s in Russia embodied the notion of glasnost and gained outsize prominence,” CEO Chris Kempczinski wrote in a letter to the McDonald’s system Monday after the company announced its intention to sell.
In the three decades since the first location opened in Moscow, McDonald’s had expanded its business in Russia to around 850 locations. The company owned about 84% of these restaurants, while the rest were operated by franchisees. Owning more restaurants generates more revenue for the business but puts it at greater risk during times of turbulence or economic downturns.
In early March, after the Kremlin invaded Ukraine, McDonald’s announced it would temporarily close its Russian locations. The company said in late April that halting its operations in Ukraine and Russia due to the war cost it $127 million in the first quarter. And on Monday it announced that it plans to sell the business.
“Some may argue that giving tens of thousands of ordinary citizens access to food and continued employment is certainly the right thing to do. But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine,” Kempczinski said in his letter.
Other Western companies are also choosing to sell their Russian operations, including automaker Renault and oil giant Exxon Mobil.
Govor operates 25 McDonald’s branches in Siberia and has been the fast food chain’s licensee since 2015.