What is in this article?:
- Restaurant Operations Watch: McDonald's faces perils abroad
- What McDonald's Pushkin Square unit signifies
NRN editor and restaurant operations expert Ron Ruggless breaks down what you should be watching in the industry this week. Connect with him on the latest operations trends and news at @RonRuggless and firstname.lastname@example.org.
U.S. restaurant brands have realized expansion opportunities over the past decade in the growing markets of Brazil, Russia, India and China, but an early and big player in the growth abroad this past month ran head-on into the downside.
McDonald’s Corp., you could say, hit a BRIC wall, especially in the R (ussia) part.
The world’s largest burger brand, which has more than 400 restaurants in Russia, objected on Friday to the Russian government’s recent decision to close a dozen of its restaurants after weeks of highly publicized health and safety investigations of its locations there.
See the latest McDonald's closures in Russia >>
“We are closely studying the content of the agency documents to determine what should be done to re-open the restaurants as soon as possible,” the company said in a statement.
The health investigations of the Oak Brook, Ill.-based McDonald’s franchised units came against a backdrop of heightened tensions between the United States and Russia over troops in the Ukraine and annexation of Crimea.
While Russian authorities maintain that the restaurants have been closed for health reasons, critics say the closures are a response to U.S. sanctions against Russia.
Such exposure to the uncertainties of geopolitics comes as more U.S. brands look for opportunities abroad. The BRIC countries have proved to offer prospects for major U.S. restaurant brands, but also a certain amount of hazards. The next frontier of Mexico, Indonesia, South Korea and Turkey — or the so-called MIST countries — harbor their own risks.
Meanwhile, the Russian news agency Ria Novosti on Friday reported that about 100 inspections of McDonald’s units were underway in various regions of the country.
Ria Novosti said Russia’s consumer watchdog division, Rospotrebnadzor, launched checks in 18 regions throughout central Russia. And the news agency said the 12 closures so far were politically popular among Russians polled by SuperJob’s Research Center, which found 62 percent of Russian respondents would support the closure of all McDonald’s restaurants in the country.
Multinational corporations have been a key driver in Russia’s economy, so a complete shutdown of a brand like McDonald’s is unlikely, observers note.
McDonald’s restaurants employ thousands of Russian citizens, so a ban on the brand would lead to sizable unemployment, according to a news analysis by George Zack of BidnessEtc.com.
“In addition, the spillover effect will further affect local Russian businesses since more than 80 percent of raw materials are sourced in from domestic businesses within Russia,” Zack noted.
Furthermore, Arkady Dvorkovich, Russia’s deputy prime minister, said earlier this week that Russian authorities have no plans of banning McDonald’s.
Among the dozen McDonald’s units temporarily shuttered was the popular one in Moscow’s Pushkin Square, the first store opened in Russia.