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The Street
The Street
Business
Tony Owusu

McDonald's, Starbucks, Coca-Cola Pull Out of Russia

There are no winners when it comes to war.

This maxim is being made abundantly clear as Russia's invasion of Ukraine has resulted in thousands of deaths and an untold number of displaced refugees. 

In an effort to avoid an all out military war with its similarly nuclear-armed adversary, the U.S. and its allies have relied on economic sanctions and financial warfare to bring an end to the conflict in Eastern Europe.

This has led to a slew of Western companies abandoning the rogue state

Apple (AAPL), Netflix (NFLX), Volkswagen, Boing (BA), ExxonMobil (XOM), Zara, H&M  (HMRZF)  and Ikea are only a few of the high profile names that are now refusing to do business in the country. 

But there have also been some high profile names that are continuing to business in Russia. 

American staples like Yum!Brands (YUM)  hasn't shuttered its doors yet, and until this week, neither had Starbucks (SBUX), McDonald's  (MDNDF)  or Coca-Cola (KO)

As of Tuesday, however, that is no longer the case.

McDonald's, Starbucks, Coca-Cola Suspend Operations in Russia

McDonald's was one of the first Western countries to open in Russia in 1990 following the disintegration of the Soviet Union. 

It planted a flag for other U.S. companies to follow and was a symbol of capitalism's triumph over communism.  

More than 30 years later after receiving harsh backlash on social media, McDonald's announced Tuesday that it is temporarily closing its doors in Russia.

"The situation is extraordinarily challenging for a global brand like ours, and there are many considerations," McDonald's CEO Chris Kempczinski said in an email to employees and franchisees Tuesday. 

The company will temporarily close all restaurants in Russia and pause all of its operations in the country. 

McDonald's will continue to pay the salaries for all of its 62,000 employees in Russia despite the pause in business. McDonald's has been, and says it will continue to pay full salaries for its Ukraine employees and has donated $5 million to its Employee Assistance Fund. 

The company says it has been experiencing supply chain disruptions and other operational impacts as a result of the war.

"As we move forward, McDonald’s will continue to assess the situation and determine if any additional measures are required. At this juncture, it’s impossible to predict when we might be able to reopen our restaurants in Russia," Kempczinksi said. 

On Tuesday, Starbucks also announced that it is suspending all business activity in Russia and its licensee will temporarily close locations in the country. 

Bank of America estimates that Starbucks has about 130 locations in Russia and Ukraine, all of which operate as licensed locations.

Starbucks, like McDonald's, said that it will continue to provide salaries for its nearly 2,000 employees in Russia. 

Coca-Cola also joined the boycott Tuesday, saying that it would suspend its business in the country. In a short statement, the company said it would continue to monitor the situation. 

"Our hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine," the company said. 

McDonald's Business in Russia

McDonald's gained 9% of its revenue last year from Ukraine and Russia, according to a company filing.

Unlike its franchisee-focused approach in the U.S., about 84% of its 847 locations in Russia are company-owned. All of the 108 McDonald's restaurants in Ukraine are owned by the company.

Combined, those restaurants accounted for $2.1 billion in revenue for the company last year. 

In the past, Russia has punished U.S. companies when the West places sanctions on the country.

In 2014, shortly after Moscow annexed Ukraine's Crimea region in 2014, Russia President Vladimir Putin closed four McDonald's restaurants in the country's capital over what he said were sanitary violations.

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