McDonald's Closures in Russia Cost the Fast-Food Giant $127 Million in Q1 — Here's What It Could Mean for the Country

Maxim Shemetov | Reuters

Two months after the fall of the Berlin Wall in 1989, McDonald's — the very symbol of Western capitalism — opened its first store in the Soviet Union. It was a big moment, and the restaurant drew large crowds.

More than 30 years later, amid pressure from U.S. consumers to protest Russia's invasion of Ukraine, McDonald's last month announced it would be temporarily closing all 850 of its locations in Russia.

Starbucks, PepsiCo and Coca-Cola likewise announced their plans to pause business activity in Russia, and Yum Brands, which franchises about 1,000 KFC restaurants and 50 Pizza Hut locations in Russia, suspended all investment and restaurant development in the country

More than 750 companies have since curtailed operations in Russia.

McDonald's has also temporarily shuttered its 108 locations in Ukraine for safety reasons. Russia and Ukraine together account for roughly 2% of McDonald's global sales and less than 3% of its operating income.

There's no telling when or if McDonald's will resume its operations in Russia and Ukraine, but the company is taking a hit to its bottom line. The company announced during its first-quarter earnings that the closures cost McDonald's $27 million in leases, supplier costs, and employee wages, and another $100 million in unsold inventory. Altogether, those expenses dragged its earnings down by 13 cents per share in the first quarter.

In the meantime, the fast-food chain has committed to continue paying its employees in both countries.

Watch the video to learn more about the impact of McDonald's leaving Russia.

Copyright CNBC
Contact Us