When McDonald's opened its doors in Moscow's Pushkin Square in 1990, it was welcomed by more than 30,000 Russians who were eager to spend their daily wages on a taste of America.
Through burgers and fries, a food diplomacy was forged, one that flourished over the past three decades as corporations like McDonald's and PepsiCo, private investment firms and individuals plunged billions of dollars into building factories and restaurants to bring food, culture and good-old American capitalism to Russia. It was sandwiched between two buns.
McDonald's was more than the opening of a simple restaurant, according to a former managing director of McDonald's Russia.
The invasion of Ukraine by Russia has changed everything, and food companies and restaurant chains have struggled with how to respond. McDonald's announced on Tuesday that it was temporarily closing its nearly 850 locations in Russia and suspending operations in the country.
Chris Kempczinski, the company's chief operating officer, said that McDonald's has been an essential part of 850 communities in which it operates in Russia for 30 years. 62,000 people were employed by the company.
Several prominent food companies and restaurants followed the McDonald's announcement. Starbucks is closing all of its locations in Russia, which are owned and operated by the Alshaya Group. Coca-Cola stopped sales there.
The company said it would no longer sell its products in Russia but would continue to produce dairy and baby food products in the country.
Daily business updates The latest coverage of business, markets and the economy, sent by email each weekday.Fast-food chains have been criticized for lagging behind other companies with decisions about their Russia operations, which has led to pressure on businesses to pull out of Russia.
The act of pausing or ceasing operations in the country is complex for food companies that have spent decades cultivating the Russian market. It involves undoing local supply and manufacturing chains, addressing the fates of tens of thousands of Russian employees, and untangling close ties with Russian banks, investors and others that allowed them to flourish all these years.
Russian operations make up less than 3% of McDonald's operating income and less than 9% of its revenue. Russia accounts for 4% of the company's annual revenue of $79.4 billion. The company says on its website that it is the largest food and beverage manufacturer in Russia. It has more than 20 factories in the country.
PepsiCo has been there for a long time. Bruce W. Bean, a professor at Michigan State University's law school who worked with companies in Russia, said thatPepsi was there under Nixon.
It will hurt the Russians who have picked up the business, but it will also hurt the company.
Many of the Papa John's and Yum Brands restaurants in Russia are owned by groups of investors through franchise agreements, meaning that the companies have less control over whether those restaurants close.
Ben Lawrence is a professor of franchise entrepreneurship at Georgia State University. He said it was hard to tell the franchisees to shut down if they were meeting the requirements under their agreement.
The company said on Tuesday that it was suspending operations at 70 company-owned restaurants and 50 franchise-owned restaurants in Russia. The vast majority of the 1,000 KFCs in Russia are franchise-owned. All investment and restaurant development in Russia will be suspended and profits diverted to humanitarian efforts.
McDonald's, which has invested millions of dollars into building restaurants in Russia and is a symbol of American culture, has felt the impact of geopolitics before. When the United States and other nations imposed economic sanctions on Russia, the authorities closed down a number of McDonald's locations in the country. The location reopened 90 days later.
Russia has been one of the fastest-growing markets for American brands over the last two decades. McDonald's, Subway, and others thrived because they were cheap places to grab a meal at midday, and also because they were a glimpse of Western civilization.
There is gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. European leaders accuse Russia's president of reducing supplies to gain a political edge, as natural gas reserves are running low.
There are shortages of essential metals. Russia is the world's largest exporter of the metal and the price of it has gone up as a result. The price of nickel has gone up.
Financial turmoil. Russia's access to foreign capital and its ability to process payments in dollars, euros and other currencies will be affected by the sanctions. Russia is also on alert for cyberattacks.
In Russia, visits to fast-food restaurants grew 13 percent in the year that ended in December, according to a report by the research firm.
In an interview with the New York Times in 2011, Christopher Wynne said that he could succeed in his sleep. After working for the National Nuclear Security Administration in Russia, Mr. Wynne saw other opportunities and bought the largest Papa John's pizza franchise in Russia. He owned restaurants in Poland and Germany.
In May last year, PJ Western, which now holds the exclusive rights to sell Papa John's pizza in the region, showed plans to open about 30 stores a year in Russia through 2029.
The document shows the close ties that Mr. Wynne has forged with others. The Russian private-equity firm Baring Vostok and the private-equity firm CapMan are partners in the project.
Emails were not returned to PJ Western, Papa John's, Mr. Ovechkin, CapMan and Baring Vostok.
Mr. Carena, the former managing director of McDonald, said that the company worked hard to show that it is one of the mostRussified foreign corporations in the country. The company, which owns 84 percent of its restaurants in Russia, employed tens of thousands of people and was the largest taxpayer to Russia in the food industry, according to Mr. Carena. He works for Mars Wrigley.
Mr. Carena told the magazine that they have been more proactive in showing the authorities how Russified we are. We support local businesses and communities.
All Rights Reserved © 2024
