The impact of Russian President Vladimir Putin’s invasion of Ukraine has stretched beyond the devastating toll to the citizenry and the global disruption of supply chains to now include a blow against western culture itself as McDonald’s Corporation made a major announcement Monday.
On Jan. 31, 1990, McDonald’s opened their first location in Moscow following the fall of the Berlin Wall. Since the Soviet Union was toppled, nearly 850 locations run by franchisees cropped up around the nation and, after more than 30 years, they have decided to permanently extinguish the golden arches.
In an official statement released Monday, McDonald’s announced, “The humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable.”
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Mere weeks into the invasion they had taken a stance against Putin’s invasion and temporarily shuttered operations while continuing to pay their 62,000 employees their salaries. They had made clear at the time that they would be continuing to “assess the situation and determine if any additional measures are required.”
The time for those measures has arrived and President and Chief Executive Officer Chris Kempczinski expressed the challenge of making a decision that impacted owners, employees and Russian suppliers who had made their operations possible over the last three decades.
“Their dedication and loyalty to McDonald’s make today’s announcement extremely difficult,” Kempczinski said. “However, we have a commitment to our global community and must remain steadfast in our values and our commitment to our values means that we can no longer keep the Arches shining there.”
Sticking true to their original commitments, the McDonald’s Corporation explained that they would continue to pay the salaries of Russian employees until a deal could be brokered and completed where a potential buyer would take over their portfolio. They have also maintained the continued payment of salaries for Ukrainian employees where their restaurants have been closed. In the meantime, they intend “to initiate the process of ‘de-Arching’ those restaurants, which entails no longer using the McDonald’s name, logo, branding, and menu.”
However, they did note “the Company will continue to retain its trademark in Russia,” suggesting they plan for a way to reintroduce themselves into the market at some future juncture. As a result of the operational decision, McDonald’s explained it will write off “its net investment in the market and recognize significant foreign currency translation losses previously recorded in shareholders’ equity” through a non-cash charge between $1.2-1.4 billion.
Ultimately, the company “expects operating margin to be in the 40% range as a result of the charge” and for the overall outlook in 2022 to have capital expenditures around $2.1-2.3 billion.
This move may lead to other companies following suit as Russia is increasingly ostracized and isolated from the western world as ties have voluntarily been severed.
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