McDonald’s exit from Russia costs it about nine per cent of its revenues and about three per cent of its profits, so it’s no big deal.
The mega chain will maintain its trademarks in Russia leaving room for re-entry at some point, but will immediately remove the McDonald’s name, logo, branding and menu from its units in Russia in a process the company referred to as “de-Arching.”
McDonald’s expects to open 1300 NET new stores this year far exceeding the number to be closed in Russia and these stores are certain to be more profitable than those operated in Russia.
In fact, the company reported profits recently which far exceeded most estimates in spite of the difficulties of the war.
McDonald’s also proved its inflation resistant attributes with the company reporting sales increasing 20 per cent year over year and profit margins consistent with historical results.
While this is a setback for McDonald’s, it proves once again the company acts fast when confronted with challenges and cares deeply about its brand.
The McDonald’s brand is one of the most valuable in the world. That’s what you, as an owner, should care most deeply about.
The company’s management team appears to care deeply about its values and is exiting Russia because “ownership of the business in Russia is no longer tenable, nor is it consistent with McDonald’s values.”
The company continues to generally demonstrate good corporate governance.
For example, the buyer of the business in Russia has agreed to retain McDonald’s employees for at least two years and will also cover existing liabilities to landlords, utilities and suppliers.
Our commitment to our thesis that McDonald’s is a unique and dominant international brand, serving billions of meals every year with a commitment to quality, service and good business practices keep it a strong component of your portfolio.
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