Closing McDonald’s stores in Russia will cost money

McDonald’s restaurant in Pskov, Russia. photo: iStock

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McDonald’s anticipates that closing its stores in Russia as a result of the Russian invasion of Ukraine will cost the company about $ 50 million a month, CNBC reports.

The company announced on Tuesday that it will temporarily close its restaurants in Russia. McDonald’s has 850 restaurants in Russia, most owned by the company, not franchises.

Other US restaurant companies, including Starbucks, Yum Brands and Papa John’s, followed McDonald’s and its juice supplier, Coca-Cola.

Because most of its restaurants in Russia and Ukraine are owned by the company, McDonald’s has a higher exposure than most US fast food chains with locations in these markets.

The fast food chain has been criticized for not reacting to the war in Ukraine until it announced its closure.

Kevin Ozan, McDonald’s chief financial officer, told the UBS Global Consumer and Retail Conference on Wednesday that the company was still assessing the impact of the decision on its business.

However, McDonald’s currently estimates that closing restaurants in Russia will cost about $ 50 million a month, or about 5 to 6 cents a share.

For comparison, McDonald’s reported fourth-quarter net income of $ 1.64 billion and earnings per share of $ 2.18.

The company has pledged to pay all of its approximately 62,000 Russian employees while shutting down its restaurant operations.

Ozan said McDonald’s will also pay leases for its locations, as well as supply chain costs and other expenses.

“We expect this to be temporary and we certainly don’t make that decision easily, but for us it’s about doing what we think is the right thing to do, both for global business and for our local people. “, he said.

McDonald’s has long played a symbolic role in Russia. The chain opened its first location in the Soviet Union 32 years ago in Moscow months before the communist state fell apart.

In addition to the temporary closure of Russian restaurants, McDonald’s has also closed 108 restaurants in Ukraine for the time being.

Russia and Ukraine together account for about 2% of McDonald’s group sales, 9% of its revenues and 3% of its operating revenues.

Starbucks said on Tuesday it would suspend all business in Russia and that its licensee had agreed to temporarily close all of its coffee shops.

Like McDonald’s, the coffee chain will continue to pay its 2,000 Russian employees while its cafes are closed.

Starbucks CEO Kevin Johnson condemned Russia’s invasion of Ukraine on Friday.

Yum has announced that it is suspending all operations for the company’s KFC locations in Russia and is finalizing an agreement with its main Russian franchisee to suspend all operations of Pizza Hut restaurants there. The company has already said it will suspend Russian investment and open new restaurants.

Almost all of the approximately 1,050 Russian locations in Yum are operated by franchisees.

Pope John’s also said on Wednesday that it had suspended all corporate operations in Russia, where a franchise controls operations and owns a restaurant supply chain.