In January 1990, McDonald’s made history when the company opened its first location in Moscow, creating a symbol of unity between the U.S. and Russia after decades of tension. “In the history of McDonald’s, it was one of our proudest and most exciting milestones,” said CEO Chris Kempczinski. “After nearly half a century of Cold War animosity, the image of the Golden Arches shining above Pushkin Square heralded for many, on both sides of the Iron Curtain, the beginning of a new era.” This flagship location was eventually joined by more than 850 others scattered throughout the country, which employed more than 62,000 people.

This optimistic era came to an end in March 2022, however, when McDonald’s suspended operations in Russia following the invasion of Ukraine. Then a few days ago, the chain announced that it would make its exit from the country permanent after finding a local buyer for its Russian restaurants. “This is a complicated issue that’s without precedent and with profound consequences,” said Kempczinski. “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.” McDonald’s plans to “de-Arch” its locations in Russia before handing them off, which means getting rid of all company logos and branding. 

The company also expects to record a loss of more than $1 billion as a result of its hasty exit from a major market. Regarding staff, McDonald’s said in a statement that its “priorities include seeking to ensure the employees of McDonald’s in Russia continue to be paid until the close of any transaction and that employees have future employment with any potential buyer.” Kempczinski said that “some might argue that providing access to food and continuing to employ tens of thousands of ordinary citizens is surely the right thing to do. But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine. And it is impossible to imagine the Golden Arches representing the same hope and promise that led us to enter the Russian market 32 years ago.”

Questions:

1. What was the significance of McDonald’s expansion into Russia in 1990? How have circumstances changed since then?
2. What challenges will McDonald’s face as it ends operations in Russia?

Source: Lauren Hirsch, “After 32 Years, McDonald’s Plans to Sell Its Russia Business,” The New York Times, May 16, 2022.