McDonald’s (MCD) closing stores in Russia is a big deal

In a memo to McDonald’s staff on Tuesday afternoon, CEO Chris Kempczinski announced the global fast food giant is closing all of its stores in Russia, saying “our values mean we cannot ignore the needless human suffering unfolding in Ukraine.”

While known for its franchise model, McDonald’s owns more than 80% of its 847 Russian restaurants, and sales in that country make up about 9% of total revenues. In his company-wide memo, Kempczinski said the company will continue to pay the salaries of its 62,000 employees in Russia, and the Ronald McDonald House Charities will continue to run there. In Ukraine, the CEO said McDonald’s continues to pay full salaries for its Ukrainian employees, has donated $5 million to its Employee Assistance Fund, and continues to support relief efforts led by the International Red Cross in the region.

As one of the world’s most famous brands, McDonald’s had been called out for being late in its reaction to the Russian invasion, with #BoycottMcDonalds becoming a trending Twitter topic. While major brands like Visa, MasterCard, Nike, Netflix, Alphabet, Apple, Levi’s, and many others had earlier suspended sales and/or operations, the Golden Arches stood out—until now.

The significance of McDonald’s closing its operations holds more weight, given its historical role in opening Russia up to Western culture after the Cold War. Three months after the fall of the Berlin Wall, the company opened its first location in Moscow.

In his 1999 best-seller The Lexus and the Olive Tree, Thomas Friedman famously used the company as the cornerstone of his (regularly debunked) argument for globalized business as a tool for peace. His “Golden Arches Theory of Conflict Prevention,” essentially said that—up to that point—”No two countries that both have a McDonald’s have ever fought a war against each other.” While not exactly correct, it does illustrate the power of the brand and its international presence. 

Yale School of Management professor Jeffrey A. Sonnenfeld is maintaining a running list of companies’ status in Russia, and wrote this week about how corporations and major brands can follow the example of more than 200 Western companies pulling out of South Africa in 1990 in protest of apartheid. The point is to make a statement against the government while not inflicting undue harm on its people.

McDonald’s continuing its charitable work, and paying its Russian employees, illustrates its dispute is with the country’s leadership, not its people. Back in 1990, Coca-Cola had a $10 million Equal Opportunity Fund, administered by a board including the late Bishop Desmond Tutu, and pledged to sell its South African facilities to a local investor group, which included Black South Africans.

The significance of McDonald’s move can also be measured in its influence over fellow global brands. Within hours of the company’s announcement, both Starbucks and Coca-Cola issued their own announcements of halting operations in Russia. Call it the Golden Arches Theory of Copycat Brand Values, in which global brands don’t want to be the last one jumping on the right side of history.