McDonald's
McDonald's

McDonald’s closures in Russia cost the company $127 million in Q1 – what does it mean for Russia?

2 mins read

When the Berlin Wall came down in 1989, McDonald’s — the ultimate epitome of Western capitalism — opened its first store in the Soviet Union, just two months after it did in the United States. It was a momentous occasion, and the restaurant was packed to capacity.

McDonald’s said last month that it would be temporarily closing all 850 of its outlets in Russia in response to consumer pressure from the United States in response to Russia’s invasion of Ukraine.

Starbucks, PepsiCo, and Coca-Cola also announced plans to halt business operations in Russia, and Yum Brands, which franchises approximately 1,000 KFC restaurants and 50 Pizza Hut locations in Russia, announced that it would cease all investment and restaurant development in the country effective immediately.

Since then, more than 750 enterprises have ceased operations in the Russian Federation.

McDonald’s has also temporarily closed its 108 stores in Ukraine due to concerns about public safety. It is estimated that Russia and Ukraine account for less than 3% of McDonald’s worldwide sales and less than 3% of its operational profitability.

Even though it’s impossible to predict when or if McDonald’s will restart operations in Russia and Ukraine, the company’s bottom line is being affected hard by the closure. McDonald’s reported during its first-quarter earnings that the closures had cost the firm $27 million in lease payments, supplier costs, and staff wages, as well as an additional $100 million in unsold inventory, according to the company. Over the course of the quarter, these charges reduced the company’s earnings by 13 cents per share on average.

Between now and then, the fast-food corporation has committed to continuing to pay its workers in both nations.

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