McDonald’s expects its Russian shutdown will cost the fast-food giant roughly $50 million a month until it reopens its restaurants there.
The Chicago-based company announced Tuesday it would temporarily shutter its Russian locations as Russian President Vladimir Putin’s forces continue their attacks on Ukraine. McDonald’s has about 850 locations in Russia, the majority of which are owned by the company, not franchisees.
Other U.S. restaurant companies, including Starbucks, Yum Brands and Papa John’s followed McDonald’s lead, as well as its soda supplier, Coca-Cola. Because most of its restaurants in Russia and Ukraine are company-owned, McDonald’s has greater exposure than most other U.S. fast-food chains with locations in those markets. The burger chain drew criticism for staying silent on the war until it announced the closures.
McDonald’s CFO Kevin Ozan said at the UBS Global Consumer and Retail Conference on Wednesday that the company is still calculating the impact on its business. However, McDonald’s currently estimates that it will cost about $50 million per month, or roughly 5 cents to 6 cents per share. For comparison, McDonald’s reported fourth-quarter net income of $1.64 billion and earnings per share of $2.18.
The company has committed to paying all of its approximately 62,000 Russian employees during the pause in restaurant operations. Ozan said McDonald’s will also be paying leases for its locations, as well as supply chain costs and other expenses.
“We expect this to be temporary and we certainly don’t take this decision lightly, but for us this is about doing what we think is the right thing to do, both for the global business and for our people locally,” he said.
McDonald’s has long played a symbolic role in Russia. The chain opened its first location in the Soviet Union 32 years ago in Moscow, months before the state collapsed.
In addition to closing its Russian locations temporarily, McDonald’s has also shuttered 108 restaurants in Ukraine for the time being. Russia and Ukraine together account for roughly 2% of McDonald’s systemwide sales, 9% of its revenue and 3% of its operating income.
Starbucks said Tuesday that it would pause all Russia business activity and that its licensee there had agreed to shutter all of its cafes temporarily. Like McDonald’s, the coffee chain will keep paying its 2,000 Russian workers while its cafes are closed. Starbucks CEO Kevin Johnson on Friday condemned Russia’s invasion.
Yum announced it is suspending all operations for its company-owned KFC locations in Russia and is finalizing an agreement with its Russian master franchisee to pause all Pizza Hut restaurant operations there. It had already said it would suspend Russian investment and new restaurant development. Nearly all of Yum’s roughly 1,050 Russian locations are operated by franchisees.
And Papa John’s said Wednesday it has suspended all corporate operations in Russia, where a master franchisee controls operations and owns the supply chain for restaurants. The pizza chain isn’t currently receiving any royalties from those franchised locations.