Mcdonalds Dubai 24 Hours – Exclusive: McDonald’s month-long decision to sell all 853 stores in Russia – and lose a significant chunk of global revenue with them
It was four in the morning in London in December. On January 24, when Ian Borden, McDonald’s president of international operations, sent an urgent text message to his boss, Chicago CEO Chris Kempczinski.
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An hour ago, Vladimir Putin announced a Russian invasion of Ukraine, and attacks began in Kiev, Kharkiv, Odessa and elsewhere. Borden told Kempczinski that 107 Ukrainian restaurants had closed and that a staff hotline had been set up.
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It’s 10:00 p.m. in Chicago. Until then, 53-year-old Kempczinski, like everyone else, looked at the situation in Ukraine and was skeptical about whether he would go to war. “It feels like a saber-rattling feeling. It certainly won’t lead to any attack,” he recalled. Now you know, “Well, yes – we’re in a different world.”
Over the next 81 days, Kempczinski will find a way to make a decision that will change the lives of millions of people. This is not a business decision in Ukraine; important as it is, the call – closing restaurants, caring for employees – is simple. No, the real question is Russia and whether McDonald’s will have to give up the 853-store market, which is both an economic benefit and a strong symbol of the company’s rise to one of the best global brands in history
As part of the “de-Arching” process, workers removed a McDonald’s sign from a restaurant in Kingisepp, Russia, in May.
He knows that whatever decision he makes, the consequences will be huge. The immediate stop-or-go call will affect the company’s 62,000 employees in Russia; Almost all Russian restaurants are company-owned, not franchised, so most of these employees work directly for McDonald’s. This will also affect the company’s finances. Russia contributed 7% of global revenue last year, a significant amount as sales continue to grow from the low of the pandemic. More broadly, Kempczinski knew that his decision could determine McDonald’s brand and reputation. The pressure was compounded by the fact that the company was recovering from an embarrassing scandal involving its former CEO, who was fired for inappropriate employee relations. The saga has sparked an internal debate about McDonald’s culture and values, and company officials will no doubt view Kempczinski’s nomination through that lens.
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At most, resolution will be a distant symbol. The opening of the first Russian McDonald’s restaurant in 1990 was an international news event. With the rise of communism and glasnost, the appearance of the Golden Arches in Moscow heralded Russia’s opening to the outside world as it welcomed even the powerful capitalist American establishment. Deciding to leave would mean that the Sun is receding and the country changes course, heading inward again.
When Kempczinski entered his office on February 24, solving these pressing problems was suddenly at the top of his to-do list.
Unlike all previous McDonald’s CEOs since founder Ray Kroc, Kempczinski has not gone through the company. Instead, it was picked up by many well-known American universities and business management schools – Duke University, Procter & Gamble, Harvard Business School, Boston Consulting Group, PepsiCo, Kraft Foods – before joining McDonald’s in 2015. He quickly rose to the title of McDonald’s USA, the company’s biggest product, and became CEO in 2019. Four months later, the pandemic broke out and successfully led the company through an unprecedented crisis. Now you’re dealing with another.
First, he and his team extended the closure of Ukrainian restaurants until further notice. They are all owned by the company. After being hit by COVID, the company knew “how to shut down the entire product very quickly,” said Kempczinski. No personnel were killed at first, but it was clear that no place was safe. The company said it continued to pay all Ukrainian workers.
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A difficult word in Russia. Other organizations move fast and McDonald’s doesn’t. On the first day after the attack, Delta Air Lines announced that it had suspended its merger with Aeroflot. Formula 1 canceled the Russian Grand Prix and the Association of European Football Associations moved the final of the football Champions League from St. Petersburg to Paris. Within a week, Apple, British Petroleum, Ikea, Meta Platforms (Facebook’s parent), Netflix, Nike, Shell, Volkswagen and others announced they would stop production, halt sales, close stores or take other major measures. McDonald’s does not publish any announcements.
Between the pandemic and the crisis in Ukraine, McDonald’s CEO Chris Kempczinski, who took over in 2019, has had an eventful time so far.
The new digital version adds pressure to your work. Yale University’s Executive Leadership Institute publishes a regularly updated online list of companies moving and relocating in Russia. The curators of the list, headed by Professor Jeffrey Sonnenfeld, do not hesitate to point out important companies that are not working. A week after the attack, CNBC criticized McDonald’s for keeping silent, calling it “talk that distracts all your colleagues.”
The pain goes beyond hard words. The Sonnenfeld list contains products. After CNBC referred to several non-Russian companies, the stock prices of many, including McDonald’s, fell.
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Fame is a blessing and sometimes a curse for McDonald’s. The company claims that 85% of the US population eats there at least once a year. It is part of culture in more than 100 countries. People are interested in what McDonald’s does and doesn’t do. Within days, #BoycottMcDonalds went viral on Twitter. New York State Comptroller Thomas DiNapoli, administrator of the state’s largest occupational pension fund that owns McDonald’s shares, published a public letter to Kempczinski urging him to “consider suspending or terminating business” in Russia. However, the days went by and the company seemingly did nothing.
However, there is a lot of work behind the scenes. The annual meeting of the company’s top 50 managers took place as planned in Portugal in early March. The Russian side revealed that even Russian officials wanted to know what McDonald’s would do.
The decision is complicated in particular by the sanctions imposed on Russia by the US and other countries. The most important are the US sanctions imposed on Russia’s largest financial institution, Sberbank, which will come into force on March 26. This is a problem for McDonald’s because most of its restaurants are located in small towns. Kempczinski says, “Most of the time, the only bank in a city in rural Russia is Sberbank. “We don’t have the luxury of going to HSBC, Société Générale or anyone else.” As the Sberbank sanction approached, he said, “Then things became a little more difficult for us.”
Other managers are an important source of information for Kempczinski as he tries to answer difficult questions. “There are many connections between many countries,” he said. He did not name the presidents, but said they would call each other regularly, compare notes, share information, assess where the situation is going, and figure out how to get through it. “It’s actually been very helpful to try to build a bigger picture of what’s going on.”
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McDonald’s failure to leave Russia quickly prompted one critic to publicly denounce the company as “a high-profile inconsistency that is troubling to all its peers.”
Internal discussions are growing. Kempczinski has an “hour-long conversation” with Borden, who has first-hand experience working for the company in Russia and Ukraine. Rada and Kempczinski speak several times a week. He regularly speaks with CFO Kevin Ozan, in part because “we are considering doing some serious paperwork,” and with Desiree Ralls-Morrison’s general counsel about the importance of US and EU sanctions, many of which have been imposed. he learned quickly and was far from clear.
Meanwhile, the future of the conflict becomes increasingly unclear. Prior to the invasion, conventional wisdom held that Russia could defeat Ukraine in the blink of an eye. U.S. intelligence estimated four days; The British Prime Minister predicted that the government would fall within five hours. But in the second week, the conflict escalated and was to go on indefinitely.
To give some structure to the ever-changing problem, Kempczinski focused on answering five questions: Can we legally work in the countryside? Are we free at work? Does our decision help our brand? Does our decision make business sense? Is our decision in line with our values? As the crisis approaches its third week, Kempczinski said “we’re starting to have more yellows than greens on this list.”
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On March 8, he announced a deadline, a “suspension” of operations. All Russian restaurants will be closed “temporarily”, the company announced. For the first time, McDonald’s took a public stance on the conflict, saying it “caused untold suffering to innocent people…” We cannot ignore the unnecessary human suffering that is taking place in Ukraine.
All Russian workers will continue to pay. The company has a “moral responsibility” to them, said Kempczinski. “There is also a practical perception. If we stop for a month and reopen, the average full-time employee already on the payroll will be very useful.
The company’s announcement was made at 11:00 a.m. Chicago time. By the end of the day, Coca-Cola, PepsiCo and Starbucks also announced they had suspended sales and others.
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