McDonald's, Icon Of The Post-Soviet Era Closes All Restaurants In Russia, Including The First Outlet In Moscow

JAKARTA - McDonald's Corp. announced it will temporarily close all of its 847 restaurants in Russia, including its iconic Pushkin Square location, increasing pressure on other global brands to cease operations in the country following Moscow's invasion of Ukraine.

The closure of McDonald's restaurants will also carry symbolic importance in Russia, where the first location to open, in downtown Moscow in 1990, became a symbol of American capitalism that flourished during the fall of the Soviet Union.

McDonald's said it would continue to pay salaries to its 62,000 employees in Russia. Due to its large size and global reach, the fast food retailer is often imitated by other brands, if it takes a stand on an issue or makes a major operational change.

"If they decide to do something, then maybe others will follow," said international franchise consultant William Edwards of the company's conversation about whether to follow McDonald's by closing its Russia location on moral grounds.

McDonald's opened in Pushkin Square 32 years ago when the Soviet Union collapsed. The new restaurant represents a melting pot of Cold War tensions, at a time when some young Russians are desperate for blue jeans and other Americanas.

"It is impossible to predict when we will be able to reopen our restaurants in Russia," McDonald's CEO Chris Kempczinski said in a note emailed across the company on Tuesday and posted on the company website.

"We are experiencing disruptions to our supply chain along with other operational impacts. We will also be monitoring the humanitarian situation closely."

Separately, Paul Musgrave, a University of Massachusetts professor of political science, said the closure of McDonald's showed how the swift and widespread imposition of Western sanctions on Russia would have a lasting economic impact.

He also said the decision broke the theory that business relations would inevitably lead to closer US-Russian relations.

"This is the spiritual end of the hope that commercial ties will naturally sustain political integration," he said.

Added Jeffrey Sonnenfeld, a professor at the Yale School of Management who tracks the attitudes of large companies in Russia: "I'm very happy that they realized it was such a delicate situation, and I'm glad they came along and made the right decision. This is a very important impact, and it's both symbolic and substantive."

Of Russia's nearly 850 McDonald's locations, 84 percent are company-owned. The remainder is largely operated by Moscow-based franchisee Rosinter Restaurants Holding.

Because McDonald's has multiple locations in Russia, McDonald's has more direct access to closing operations. That may not be easy for other fast food chains in Russia, including KFC and Pizza Hut Yum Brands Inc., Burger King of Restaurant Brands International., Subway., Papa John's International Inc., Starbucks., and Domino's Pizza Inc.

The company's locations in Russia are run almost entirely by independent operators and are subject to complex international franchise agreements. Some fast food franchises with locations in Russia are not even based in Russia, such as Netherlands-based DP Eurasia, which runs Domino's restaurant in Russia, as well as in Turkey, Azerbaijan, and Georgia.

"These are often long, complex, highly negotiated agreements. Each agreement can be different from the other," says Larry Weinberg, who leads the franchising practice at law firm Cassels Brock & Blackwell LLP.