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McDonald’s makes symbolic exit from Russia after 30 years

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Yahoo Finance's Brooke DiPalma joins the Live show to discuss McDonald's exiting Russia after 30 years.

Video Transcript

- Well, fast food giant McDonald's is announcing it will leave Russia for good, and it's set to sell all of its assets and exit the market more than 30 years after it opened its first location in Moscow. Let's bring in Yahoo Finance's Brooke DiPalma, who is following the story for us. Let's first talk about the historical significance of this because, you know, back in 1990 is when they first opened. We've seen those photos of the long lines. How significant is it, you know, just from a symbolic standpoint?

BROOKE DIPALMA: Yeah, well, symbolism is everything here from McDonald's. As you noted, more than 30,000 people went to that location in McDonald's Pushkin Square. That is in Russia.

And on that day, those 30,000 people were really looking just to get a taste of Western culture. They were looking to get a taste of what exactly they had heard about. Now of course today, a much different story-- McDonald's announcing that they're going to exit the Russia market, and it's looking to sell its restaurants to a local buyer there in Russia.

In a statement to Yahoo Finance, a spokesperson at McDonald's said, today, McDonald's announced it will exit the Russian market. The humanitarian crisis caused by the war in Ukraine and the precipitating unpredictable operating environment have led McDonald's to conclude that continued ownership of this business in Russia is no longer tenable nor is it consistent with McDonald's values. Now for many, that 1990 opening up was symbolic of the end of the Cold War, of the fall of the Soviet Union.

And now today, it's looking to ultimately sell those locations in Russia to a local buyer. It says that-- it's important to note here that it will not use the McDonald's name, logo, branding, or the menu, though the company will continue to allow those locations to use its trademarks. And when I spoke to a professor here, they said that this is quite literally the end of a chapter, the end of an era there. And today, we're watching a new chapter unfold.

- Well, and that raises a question. McDonald's, obviously a massive international conglomerate. But how substantial was the Russia business to them? What type of financial impact would you expect from this?

BROOKE DIPALMA: Yeah, well, actually, Brian, most of those locations in Russia are company operated. So there's about 62,000 employees in Russia, and there's about 847 units. Now according to reports, 84% of those locations in Russia are owned by the company while the rest are operated by franchisees.

There's about three significant franchise groups in Russia. So potentially there might be a buyer for the company. But it's also important to note that according to BTIG, Peter Saleh, a friend of the show, we saw about 9% of revenue come from both Russia and Ukraine. Now keep in mind, locations in Ukraine are still temporarily closed.

So it is a pretty significant amount of the company there in Russia. And of course, for those consumers there, what does this mean? How will they get a taste of the West like they've been used to for the past 32 years?

- Well, there's still a number of Western food outlets, right, that have their businesses paused in Russia. I mean, how many of them-- Starbucks, potentially-- do you think are likely to follow McDonald's move?

BROOKE DIPALMA: Yeah, well, it's important to note here that Starbucks actually has many of its locations licensed in Russia. It doesn't actually have company operated stores in Russia. Also Yum Brands there.

It actually-- it says it's primarily franchise-owned. But keep in mind, for Yum Brands, globally, about 53,000 locations, those are mostly franchise owned. So it really will be an interesting story to follow.

Of course, back in 1990, we saw McDonald's open up the gateway to the west. Then we saw other companies like Yum Brands, like Starbucks. So does this mean-- Akiko, there's the question.

Does this mean that Starbucks, Yum Brands, other companies will follow? Also today, we saw another not consumer-facing brand in the food space, but Reynolds group signed agreements to sell their Reynolds Russia group there. So we're seeing other companies follow suit. It's going to be an ongoing story but very much so on the consumer facing front.

- Those throwback photos are crazy.

BROOKE DIPALMA: Yeah, 30,000 people.

- That's huge.

BROOKE DIPALMA: We were talking before--

- Would you line up--

BROOKE DIPALMA: --like a stadium.

- --for McDonald's?

- Brooke and I were talking about this before a show. It's like, unless they were giving out some coupons or something, I really--

BROOKE DIPALMA: Can you imagine a line that long?

- It's like a BTS concert out there, though. I mean, 30,000 people? That's an entire stadium.

BROOKE DIPALMA: McNuggets, though? First taste, you're hearing all about it. You want to know? Would you do it, Akiko?

- I wonder if it tastes better. We were talking about this. Sometimes US outlets taste better internationally. We're saying KFC tastes better.

- Well, they do. Yeah, they have. I have thoughts about the chicken nuggets, though, that I won't go into.

- Oh, that's what-- I could see your brain racing.

- Yeah, I"m not going to do it, though.

- Either way, it just feels like another step towards this decoupling between the Russian economy and the west. But Brooke, appreciate you bringing us the story.