Starbucks Follows McDonald’s in Russia Exit, Vows to Pay 2000 Staff for 6 Months Until Next Job

Starbucks, the highly popular coffee chain, announced that it would be leaving Russia for good after 15 years of service in the country, following the footsteps of McDonald's, and vowed to pay 2,000 employees for the next six months until their next jobs.

The incident makes Starbucks the latest Western corporation to quit serving the country over the invasion of Ukraine. The coffee chain will entirely retreat from the Russian market after suspending trading there earlier in March. The process of unwinding licensing deals takes a lot of time, which is why the companies decided to do it early.

Starbucks Leaves Russia

The company's officials said they would continue to pay nearly 2,000 staff members working at its shops in Russia for at least six months. US and Western allies responded to Moscow's aggression by hitting the country with wide-ranging economic sanctions.

These aimed to isolate the nation economically and cut it off from the global financial system, rules that make it difficult for Western companies to operate there. Starbucks first entered Russia in 2007 and has since grown to include 130 coffee shops owned and operated by a licensee, as per BBC.

Starbucks officials did not provide details of the financial impact of the decision to leave Russia but said that the company would provide assistance to staff "to transition to new opportunities outside of Starbucks."

A similar move was made by McDonald's, where the burger chain said last week that it was selling its Russia business after operating in the country for more than three decades. The company said that the "humanitarian crisis caused by the war in Ukraine, and the precipitating unpredictable operating environment, have led McDonald's to conclude that continued ownership of the business in Russia is no longer tenable, nor is it consistent with McDonald's values."

According to CNN, the company later announced that it had entered into an agreement to sell the business to an existing licensee who would open the restaurants with new branding. McDonald's also decided to pause operations in Russia in March. At the time, Starbucks' CEO Kevin Johnson said, "we condemn the horrific attacks on Ukraine by Russia and our hearts go out to all those affected."

Economic Effects of the War

Starbucks' exit from Russia will result in the closing of 130 stores in the country, which account for less than 1% of the company's annual revenue. Johnson had pledged to donate royalties from the Russian business to humanitarian causes.

On the other hand, McDonald's was dealt a severe financial blow for shutting down its extensive operations in Russia. The fast-food company said it cost $127 million in its first quarter. The two markets accounted for 9% of its revenue in 2021, and it had roughly 850 restaurants in the country, the majority of which were operated by the company instead of licensees.

The company's decision on Thursday to sell the stores will include an undisclosed sum that will be paid to a Siberian franchisee who is expected to run the stores under a new brand, CNBC reported.

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Starbucks, Mcdonald's