Sometimes doing the right thing isn’t easy. Sometimes doing the right thing has a cost.
Example: McDonald’s. When the world’s largest fast-food chain announced shortly after the Russian invasion of Ukraine that it was suspending operations at its 850 Russian restaurants (including company-owned and franchise locations), my reaction was to feel two things at the same time.
- First, courtesy and sympathy. It is difficult to justify that American companies continue to do business in Russia for many reasons, including both the actual reported conduct of Russian forces in Ukraine, but also the reaction of their non-Russian customers and stakeholders. they did not withdraw.
- Second: sadness, even a little grief. I’m by no means the biggest fan of McDonald’s you’ll find, but I recognize that it’s more than a restaurant, more than a business. For better or for worse, it’s a symbol of America the world over.
As I wrote here a few weeks ago now, if you’re Gen X or higher – or frankly, if you’ve been following the story for the past month – you might remember that it was of a mammoth deal in 1990 when McDonald’s opened its first location in Moscow.
The line of people outside the door on that first day, less than a year after the fall of the Berlin Wall, stretched for more than a quarter of a mile. After more than 40 years of Cold War, with the West and Russia almost sealed off from each other, this was truly a landmark event.
Then another 32 years passed, and last month that changed when McDonald’s pulled out. Most other major American and Western countries have also done so.
And this week, McDonald’s explained what it’s cost the company so far: in short, a total of $127 million or morewhich includes both:
- $100 million for wasted food and other “company supply chain inventory that will likely be eliminated” and
- $27 million for “the continuation of employee salaries, rent and supplier payments” in the country.
McDonald’s previously said it intended to continue paying employee salaries in Russia and Ukraine, where it closed restaurants for security reasons during the invasion.
Going forward, these monthly expenses are expected to be between $50 million and $55 million as long as the restaurants are closed.
Now, those losses are just a few drops in the proverbial McDonald’s bucket; Russia and Ukraine accounted for approximately 2% of McDonald’s global revenue in 2021. Overall, McDonald’s revenue increased significantly, but its net profit fell due to rising costs during the first quarter of This year.
Also, it’s not clear to me that McDonald’s wouldn’t have lost even more if they had kept Russian restaurants open. I have a feeling that if McDonald’s were still operating in Russia, I would be writing today about the continued mass protests against the country in the West.
The closures are still described as “temporary”, and there have been reports that around 100 franchise-owned McDonald’s restaurants had simply refused to close.
And while some enterprising people or companies in Russia have filed trademark applications for counterfeit McDonald’s whichlooked awfully like the Golden Arches, most reports suggest that ultimately didn’t happen.
Still, McDonald’s CEO Chris Kempczinski said the company has yet to decide what to do long-term regarding its Russian stores, but hopes to make a decision soon.
“It’s clear that this crisis is far from over,” Kempczinski said during the company’s earnings call this week. “I guess there’s probably no scenario you could come up with that we’re not considering.”