Another Round of American Companies to Leave Russia, Including McDonald’s, Which Will Close 850 Restaurants

The McDonald's logo is seen outside the fast-food chain McDonald's in New York on Oct. 22, 2019. Shannon Stapleton/Reuters

Another round of American-based multinationals, including McDonald’s, Starbucks, Coca-Cola, and General Electric, have said that they were temporarily suspending business in Russia in response to the country’s invasion of Ukraine.

Many international corporations have already ceased operations in Russia in protest of its invasion in Ukraine last month.

Pressure has been mounting for two weeks on American companies that remained in Russia, with hashtag campaigns calling to boycott companies like McDonald’s, Coca-Cola, and PepsiCo emerging on social media.

Some of the social activists have been comparing the corporate withdrawals to the large-scale corporate boycott of Apartheid South Africa in the 1980s, or the more recent controversial BDS campaign against Israel.

“Our values mean we cannot ignore the needless human suffering unfolding in Ukraine,” said McDonald’s President and CEO Chris Kempczinski in an open letter to employees on March 8.

The burger chain said it will temporarily close 850 stores but will continue paying its 62,000 employees in Russia, and its Ronald McDonald House Charities will continue to operate.

McDonald’s said it sympathizes with its Russian employees “who have poured their heart and soul into our McDonald’s brand,” and said it’s impossible to know when the company will be able to reopen its stores.

“The situation is extraordinarily challenging for a global brand like ours, and there are many considerations,” wrote Kempczinski.

The fast food giant worked with hundreds of Russian suppliers and served millions of customers every day.

McDonald’s grand opening of its first store in Moscow, on Jan. 31, 1990, a month before the fall of the Soviet Union, was symbolically hailed as a sign ending Cold War hostilities, with thousands of Russians lining up to eat hamburgers for the first time.

About 30,000 meals were sold at the end of that first day, an opening-day record for the company.

However, McDonald’s had drawn severe criticism for staying silent on the war, due to its relatively large Russian footprint.

Its restaurants in Russia and Ukraine account for 2 percent of its company sales, roughly 9 percent of its revenue, and 3 percent of its operating income, or around $2 billion last year.

“In the thirty-plus years that McDonald’s has operated in Russia, we’ve become an essential part of the 850 communities in which we operate,” Kempczinski wrote in his letter.

“At the same time, our values mean we cannot ignore the needless human suffering unfolding in Ukraine,” he said.

About 84 percent of McDonald’s in Russia are directly owned by the company, while the rest are operated by franchisees.

Direct ownership of most of its restaurants generated greater revenue for the company, but it opened it up to greater risk in times of turmoil or economic downturn.

McDonald’s has also temporarily closed 108 restaurants that it owns in Ukraine and continues to pay those employees.

Meanwhile, McDonald’s said it has donated more than $5 million to its employee assistance fund and to relief efforts.

It has also parked a Ronald McDonald House Charities mobile medical care unit at the Polish border with Ukraine, while another mobile care unit is on its way to the border in Latvia.

Last week, New York State Comptroller Thomas DiNapoli, a trustee of the NYS pension fund and a McDonald’s investor, demanded that McDonald’s and nine other companies on the fund consider pausing their operations in Russia.

“As one of the largest domestic corporations doing business in Russia, McDonald’s suspension of operations there should send a strong message to other companies,” said DiNapoli in a March 8 statement.

“Russia’s attack on Ukraine, its violent imperialism, threatens the global economy and makes doing business there extraordinarily risky if not untenable.”

Kempczinski cited, in his letter, influential former McDonald’s Chairman and CEO Fred Turner, whose mantra was, “Do the right thing.”

“There are countless examples over the years of McDonald’s Corp. living up to Fred’s simple ideal. Today is one of those days,” said Kempczinski.

Amazon said on March 8, that the company’s cloud computing network, Amazon Web Services, would stop allowing new sign-ups in Russia and Belarus.

General Electric said in a Twitter post that it was suspending its operations in Russia except for essential medical equipment and support for existing power services in the country.

Other American food chains have taken much of the heat on social media for their business in Russia.

Yum Brands, the parent company of KFC and Pizza Hut, said Monday that it is donating all of the profits from its 1,050 restaurants in Russia that account for roughly 2 percent of its systemwide sales to humanitarian efforts and has also halted new restaurant development in the country.

Burger King said it is redirecting the profits from its 800 Russian stores to relief efforts and will donate $2 million in food vouchers to Ukrainian refugees.

Coca-Cola announced that it was suspending its operations in Russia, but offered few details.

Coke’s subsidiary, the Switzerland-based Coca-Cola Hellenic Bottling Co., owns 10 bottling plants in Russia, which is its largest market, of which its parent company has a 21 percent stake in its bottling operations.

On March 4, Starbucks announced that it was donating profits from its 130 Russian stores owned and operated by its Kuwait-based franchisee Alshaya Group to humanitarian relief efforts in Ukraine.

However, the company reversed course and said it would temporarily close those stores on March 8, promising to continue to pay Starbucks’ 2,000 Russian employees.

“Through this dynamic situation, we will continue to make decisions that are true to our mission and values and communicate with transparency,” said Starbucks President and CEO Kevin Johnson said in an open letter to employees.