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McDonald’s moves out of Moscow for good over war in Ukraine

May 23, 2022 7:00PM Kids News

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The Kremlin's towers and passers-by are seen reflected in the window of a closed McDonald's restaurant in Moscow after the American fast-food giant announced it will exit the Russian market and sell its business in the increasingly isolated country. Picture: Natalia Kolesnikova/AFP media_cameraThe Kremlin's towers and passers-by are seen reflected in the window of a closed McDonald's restaurant in Moscow after the American fast-food giant announced it will exit the Russian market and sell its business in the increasingly isolated country. Picture: Natalia Kolesnikova/AFP

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American fast-food giant McDonald’s will leave Russia completely and sell its huge business, the company has announced.

McDonald’s closed its 850 Russian branches when Moscow first invaded Ukraine, but initially held out hope they would reopen and continued paying its 62,000 Russian workers.

McDonald’s was one of the first big multinational* brands to open in Russia. In the 1990s, its presence was seen as an important symbol of Russia opening to the world.

But it has said it will now begin “de-Arching” its stores in Russia in a move expected to cost the company some $US1.4 billion (A$2 billion).

media_cameraThis McDonald’s restaurant in Moscow is one of 850 Russian restaurants in the chain that will be “de-Arched” as the burger company permanently withdraws in response to Russia’s invasion of Ukraine. Picture: Kirill Kudryavtsev/AFP

Many Western businesses temporarily pulled out of Russia after its invasion of Ukraine in February. But McDonald’s is the latest company to confirm it has no plans to return as the war drags on and Russia grows more isolated following revelations* of Moscow’s cruelty in Ukraine.

“After more than 30 years of operations in the country, McDonald’s Corporation announced it will exit the Russian market and has initiated a process to sell its Russian business,” the company said in a statement on May 16.

media_cameraThe first McDonald’s opened in Moscow’s Pushkin Square in 1990 and was met with great enthusiasm by Russian customers eager for a taste of the Western world. McDonald’s exit 30 years later will be costly, as Russia accounts for 9 per cent of the company’s revenue. Picture: AFP

“The humanitarian* crisis caused by the war in Ukraine, and the … unpredictable operating environment, have led McDonald’s to conclude that continued ownership of the business in Russia is no longer tenable*, nor is it consistent with McDonald’s values.”

The company said it was looking to sell “its entire portfolio* of McDonald’s restaurants in Russia to a local buyer”.

“The company intends to initiate the process of ‘de-Arching’ those restaurants, which entails* no longer using the McDonald’s name, logo, branding, and menu, though the company will continue to retain its trademarks* in Russia.”

McDonald’s said it was looking to ensure its employees would continue to be paid until a buyer was found and that they would be able to find new jobs with whoever took over.

media_cameraA Soviet customer of the just-opened first McDonald’s in Russia holds little flags of the US fast-food enterprise at Moscow’s Pushkin Square on 31 January, 1990. McDonald’s presence in Russia was hugely symbolic of the former Soviet Union’s opening to the world. Picture: AFP

McDonald’s directly manages more than 80 per cent of its restaurants in Russia, which accounts for 9 per cent of the company’s revenue and 3 per cent of its operating profit*.

“We’re exceptionally proud of the 62,000 employees who work in our restaurants, along with the hundreds of Russian suppliers who support our business, and our local franchisees*,” McDonald’s chief executive Chris Kempczinski said in a statement. “Their dedication and loyalty to McDonald’s make today’s announcement extremely difficult.

“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.”

media_cameraOfficials in Russia have downplayed the Western sanctions, promising Russians that their favourite brands will have domestic alternatives. Picture: AFP

On February 24, Russian President Vladimir Putin ordered troops into Ukraine, triggering unprecedented Western sanctions* against Russia as foreign companies including H&M, Starbucks and Ikea announced they were pulling out.

Russian authorities have downplayed the Western sanctions and assured the Russian people the country is ready to provide domestic alternatives to their favourite international brands that have left.

– with AFP

GLOSSARY

  • multinational: company operating in several countries
  • revelations: surprising, shocking or previously unknown information that has come to light
  • humanitarian: efforts relating to improving people’s lives and reducing suffering
  • tenable: feasible, sustainable, justifiable
  • portfolio: collection of investments, such as a property portfolio
  • entails: involves, calls for, requires, demands
  • trademarks: way of identifying a business and its products and services
  • operating profit: total earnings from a company’s operations, minus interest and tax
  • franchisees: small business owner licenced to run on a franchisor’s trademark, name and business model
  • sanctions: severe actions that are intended to make people obey instructions or laws

EXTRA READING

No more McDonald’s for Moscow

What is happening between Ukraine and Russia

Macca’s burger still ‘fresh’ after 10 years

QUICK QUIZ

  1. How many people did McDonald’s employ in Russia?
  2. How many branches of the restaurant operating in Russia prior to the invasion of Ukraine?
  3. Which three other Western companies named in the article withdrew when Russia invaded?
  4. Selling the portfolio of Russian restaurants is estimated to cost McDonald’s how much?
  5. Russia accounts for what percentage of McDonald’s revenue and operating profit?

LISTEN TO THIS STORY

CLASSROOM ACTIVITIES
1. McDonald’s sell-off
After reading the Kids News article on McDonald’s selling its 850 restaurants in Russia, do you think it is more of a financial (money-driven) or moral (doing the right thing) decision? Explain your reasoning below.

  • Financial reasons why McDonald’s is closing its Russian stores:
  • Moral reasons why it will not operate in Russia:

Time: allow 20 minutes to complete this activity
Curriculum Links: English, Personal and Social, Critical and creative thinking

2. Extension
Who might McDonald’s sell its 850 restaurants to in Russia? Do you think the new owners will continue running restaurants from the sites or have other plans?

Is McDonald’s doing the right thing for the employees and suppliers by closing its Russian stores?

Time: allow 10 minutes to complete this activity
Curriculum Links: English, Personal and social, Critical and creative thinking

VCOP ACTIVITY
Creative vocabulary
Find a bland sentence from the article to up-level. Can you add more detail and description? Can you replace any “said” words with more specific synonyms?

Have you outdone yourself and used some really great vocabulary throughout your writing? Firstly, well done. Secondly, let’s ensure everyone can understand it by adding a glossary of terms. Pick three of your wow words and create a glossary for each word to explain what it means.

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