McDonald’s de-arching in Russia begins as Starbucks announces exit

There will be fewer golden bows and green aprons in Russia as both McDonald’s and Starbucks announced plans to leave the country after other foreign companies made their bets on Moscow’s invasion of Ukraine.

Starbucks said Monday it had implemented plans to exit Russia after McDonald’s announced it would sell its stores in the country. The absence of ubiquitous companies in the Russian market will be one of the most visible signs of the country’s ongoing economic division with the US and the West.

The Seattle-based coffee giant said it has “ceased all business activities in Russia, including shipping all Starbucks products” and will “no longer have any brand presence in the market.” As part of its exit, Starbucks said it will continue to support its “nearly 2,000 green ramp partners in Russia, including paying them for six months and helping partners transition to new opportunities.”

The company’s most recent quarterly and annual filings with the US Securities and Exchange Commission do not indicate how much business Starbucks does in Russia and how its withdrawal will affect its bottom line.

This was announced by a Starbucks spokesman news week in an email that the company has 130 stores in Russia that are now closed and gave no information on how the store works there.

Starbucks CEO Kevin Johnson said in a March letter to employees that the company “condemns Russia’s appalling attacks on Ukraine and our hearts go out to all those affected.” He also said the company made the decision to cease operations in Russia.

“In this dynamic situation, we will continue to make decisions consistent with our mission and values ​​and communicate transparently,” he said.

McDonald’s announced last week that it would begin the process of “de-arching” its restaurants in Russia after more than 30 years of operation. The company said the war in Ukraine and the unstable business environment were “no longer sustainable and also inconsistent with McDonald’s values.”

The US burger giant said on Friday it had reached an agreement with its existing licensee Alexander Govor to buy the chain’s entire Russian portfolio and operate it under a new brand. According to the company, Govor has been a McDonald’s licensee since 2015 and has operated 25 of its locations in Siberia.

Under the terms of the agreement, the employees will be taken on for at least two years on equivalent terms. Govor also agreed to fund the salaries of company employees working in 45 regions of the country and to cover existing liabilities to suppliers, landlords and utilities.

McDonald’s latest SEC annual report states that in 2021, company-operated sales and franchise revenue increased 21 percent. The filing states that “results reflect strong sales performance across all segments and were driven by the UK, France and Russia in the International Operated Markets segment.”

News that McDonald’s was closing its 850 stores drew long lines of Russians waiting to say goodbye to the legendary American fast-food chain, whose presence in the 1990s marked a major thaw between Soviet and Western countries relationships signaled.

How the restaurants will be renamed has sparked speculation. A Russian official said in March McDonald’s would be rebranded as “Uncle Vanya’s,” with a logo that looks strikingly similar to the gold arches.

But Oleg Paroev, a McDonald’s executive in Russia, told the Russian news agency TASS on Monday that the company’s iconic signs are being taken down.

“Retaining the yellow ‘M’ is not being considered as it clearly indicates affiliation with McDonald’s. In fact, it is the brand’s appearance,” Paroev told the news agency. He added that “the new company cannot operate under the old brand”.

news week has asked the Russian government for a statement.