McDonald’s (MCD-US) said on Thursday (19th) that it had reached an agreement to sell its Russian business to Alexander Govor, the franchisee it currently has in the market.
Govor will acquire all McDonald’s stores in Russia and operate under the new brand; also agree to retain employees on the same terms for at least 2 years, provide wages for employees working in 45 regions of the country, and pay suppliers, landlords and utilities Existing liabilities of the utility company until the transaction is completed.
Financial terms of the deal were not disclosed.
McDonald’s said on Monday (16th) that it expects to incur a non-cash charge of $1.2 billion to $1.4 billion from its net investment and foreign exchange losses in Russia.
Subject to regulatory approval, the sale is expected to close in the coming weeks. It marked the end of an era in Russia for the fast-food giant, which first entered the country a few months before the collapse of the Soviet Union.
“McDonald’s embodies the concept of publicity in Russia, and has demonstrated a remarkable concept,” CEO Chris Kempczinski wrote in a letter to McDonald’s system employees on Monday following announcing his intention to sell.
In the 30 years since opening its first location in Moscow, McDonald’s has grown to around 850 locations in Russia. The company owns regarding 84 percent of the restaurants, with franchisees operating the rest. Having more restaurants generates more revenue for the company, but it faces greater risks in times of turmoil or economic downturn.
McDonald’s said in early March that it would temporarily close its Russian branches following the Kremlin invaded Ukraine. The company said in late April that it lost $127 million in the first quarter following suspending its operations in Ukraine and Russia because of the war. It revealed plans on Monday to sell the business.
“Some might argue that feeding and continuing to employ tens of thousands of ordinary citizens must be the right thing to do,” Kempczynski said in the letter. “But we cannot ignore the humanitarian crisis brought on by the war in Ukraine.”
Other Western companies have also opted to sell their Russian operations, including automaker Renault and oil giant ExxonMobil (XOM-US)。
Govor operates 25 McDonald’s locations in Siberia and has been a franchisee of the fast-food chain since 2015.
