McDonald’s up for a second serving in Russia

Chicago: McDonald’s is to open 20 new restaurants in Russia, as the world’s largest fast food company aims to expand its business in the market a year after it got caught in the middle of deteriorating relations between Moscow and Washington.

The maker of the Big Mac has signed an agreement with local company GiD, which will extend McDonald’s restaurants into western Siberia in the “nearest future”, the Chicago-based company said. The move comes as McDonald’s is embarking on a plan to revive sales and its reputation across the globe, as consumers increasingly opt for healthier foods and it moves to mitigate the fallout from food scandals in Japan and China.

It has not had an easy ride in Russia either. Last year, as the EU and US were announcing sanctions against Russian companies, McDonald’s suddenly found itself subject to an extensive investigation into its food safety standards, forcing the temporary closure of 200 of its more than 500 restaurants.

While all restaurants subject to that investigation have since been reopened, it reportedly then became the subject of close to 100 court cases related to the findings of the probe, compared with only 10 in the previous seven years.

Another more recent investigation forced the closure of one of its Moscow restaurants for 30 days at the end of the first quarter, which it is waiting to reopen once delivery issues have been ironed out, McDonald’s said. “We are confident that the agreement with GiD will help enhance the McDonald’s brand in Russia, build the business over the long term and further strengthen the relationship with our customers,” said Khamzat Khasbulatov, president of McDonald’s Russia.

McDonald’s employs more than 40,000 people in Russia, which have about 1 million customers. It accounts for less than 5 per cent of the company’s operating profit.

As part of its turnround plan led by new chief executive Steve Easterbrook, McDonald’s is cutting about $300 million (Dh1.1 billion) in costs and revamping its menus to entice customers back to its restaurants and drive-thrus.

The move to expand in Russia comes in the same week that union leaders, politicians and workers from a number of countries testified at the Brazilian senate over McDonald’s business practices. The speakers raised concerns over the way it or its franchisees treat its staff, the level of wages and its tax payments in Europe.

Following the hearing, the labour prosecutor said he would form a task force to investigate allegations of labour law violations by McDonald’s in Brazil. Two Brazilian members of Congress called for the reopening of a parliamentary inquiry into slave labour to investigate allegations including poor working conditions at the company.

McDonald’s restaurants in Brazil are operated by regional company Arcos Dorados, employing about 40,000 people.

It did not attend the hearing. In a statement ahead of the event, Arcos Dorados said: “We are certain we are acting responsibly and fulfilling all Brazilian laws and accords.”

— Financial Times