McDonald’s announced Thursday that it agreed to sell its 850-restaurant Russia business to existing licensee Alexander Govor.
As part of the deal, he will acquire the entire portfolio and use the stores under a new brand. Govor has served as a McDonald’s licensee since 2015 and owned 25 locations in Siberia.
The agreement is contingent on employees being retained for at least two years. Govor has also agreed to fund salaries of corporate workers and cover liabilities to suppliers, landlords, and utilities until the transaction closes in the coming weeks.
The move comes just three days after McDonald’s revealed it was exiting Russia due to the ongoing war with Ukraine. The company said remaining in Russia is “no longer tenable, nor is it consistent with McDonald’s values.” The fast-food giant, which entered the market not too long after the fall of the Berlin Wall, spent more than 30 years in the country.
The chain will keep its trademarks in Russia, but will remove its name, logo, branding, and menu from all restaurant locations. Because of the transition, the brand is expected to incur costs of $1.2 billion to $1.4 billion.
McDonald’s first closed Russia stores in March, 84 percent of which are company-owned. Restaurants in Ukraine are temporarily closed as well, but the company is still paying full salaries of employees, as well as providing relief for refugees through Ronald McDonald House, food donations, housing, and employment.
“This was not an easy decision, nor will it be simple to execute given the size of our business and the current challenges of operating in Russia,” CEO Chris Kempczinski said in an open letter. “But the end-state is clear. What makes this especially hard is the dedication of our McDonald’s employees and suppliers in Russia, whose commitment to the brand set a new standard for customer service in the region. We are inspired by their passion for McDonald’s and our customers, and we are forever grateful for their contributions.”
Other major chains such as Starbucks, Yum! Brands, and Burger King have halted corporate support in Russia in light of the ongoing invasion. Like McDonald’s, Burger King said it’s working to leave the country by selling its part of a joint venture.
Despite the upcoming transaction, McDonald’s reaffirmed previously released 2022 projections, including 40 percent operating margin, more than 1,300 net restaurant openings, and between $2.1 billion to $2.3 billion in capital expenditures. Russia and Ukraine accounted for 2 percent of systemwide sales in 2021, but had a negligible impact on sales results in Q1.