McDonald’s Pullout from Russia Results In $127 Million Loss

The mass shuttering of McDonald’s restaurants in Russia and Ukraine has led to food waste and additional costs, denting the franchisor’s bottom line.

By Morgan Wood1851 Franchise Contributor
Updated 4:16PM 05/02/22

In its first-quarter earnings report, McDonald’s revealed it has lost around $100 million in wasted inventory since it shut down restaurants in Russia and Ukraine amid the ongoing conflict.

According to the report, the brand had incurred $27 million of costs related to the continuation of employee salaries and lease and supplier payments, as well as $100 million of costs for inventory in the company's supply chain that likely will be disposed of due to restaurants being temporarily closed.

Kevin Ozan, McDonald’s Chief Financial Officer, estimates that the company is losing $55 million per month in sales due to the closing of Russian and Ukrainian restaurants.

"We certainly don't take this decision lightly, but for us, this is about doing what we think is the right thing to do, both for the global business and for our people locally," Ozan said, per Huffington Post.

Per the McDonald’s quarterly report, sales in other locations helped offset the losses in eastern Europe. Sales at restaurants open at least 13 months climbed 11.8% in the quarter, driven by international locations. In the United States, sales increased by 3.5%, in part because of strategic menu price increases and marketing promotions.

McDonald’s had 847 restaurants in Russia and 108 in Ukraine as 2021 ended. Their combined incomes account for 9% of McDonald’s revenue last year. McDonald's net income fell 28% in three months as of March 31, 2022.