Starbucks, McDonald’s and Others Pause Operations in Russia

Russian operations make up only 3 percent of McDonald’s operating income but 9 percent of its revenue. Likewise, Russia accounts for $3.4 billion, or 4 percent, of PepsiCo’s annual revenue of $79.4 billion. The company says on its website that it is the largest food and beverage manufacturer in Russia. It owns more than 20 factories in the country.

“PepsiCo has been there forever. PepsiCo was there under Nixon,” said Bruce W. Bean, a professor emeritus at Michigan State University’s law school who, as an American lawyer in Russia, worked with companies making investments there.

“Obviously, PepsiCo can walk away from the business,” Mr. Bean added. “It will hurt them, but it will hurt the Russians who have picked up the business, the Russians that distribute its product — it hurts them more.”

Some companies — like Yum Brands and Papa John’s, which have hundreds of restaurants bearing their names across Russia — most likely have less control over whether those restaurants close because many are owned by individuals or groups of investors through franchise agreements, franchise experts said.

“It’s messy,” said Ben Lawrence, a professor of franchise entrepreneurship at Georgia State University. As long as the franchisees are meeting the requirements under their agreement and paying the royalty fees, it’s hard to tell them to shut down, he said.

Yum, which owns KFC and Pizza Hut, said on Tuesday that it was suspending operations at 70 company-owned KFCs and all 50 franchise-owned Pizza Huts in Russia. (The vast majority of the 1,000 KFCs in Russia are franchise-owned and, at this time, not part of these suspensions.) Yum also said it would suspend all “investment and restaurant development” in Russia and divert any profits from the region to humanitarian efforts.

Article source: https://www.nytimes.com/2022/03/08/business/mcdonalds-russia-starbucks-pepsi-coca-cola.html