McDonald's is in big trouble!
According to securities firm China citing foreign media reports, since the outbreak of the new round of Palestinian Israeli conflict, multiple countries have launched boycotts against McDonald's, resulting in a significant decrease in local store sales and many McDonald's stores being empty.
Recently, in response to the crisis, McDonald's headquarters decided to repurchase the brand's 225 restaurants in Israel. According to the statement, the transaction is expected to be completed in the coming months. However, McDonald's did not disclose the specific purchase amount. It is understood that McDonald's is a global chain brand, but its franchise stores are usually owned and operated independently by local owners.
McDonald's will repurchase all Israeli stores
On April 4th, McDonald's announced on its official website that it had repurchased all 225 McDonald's restaurants in the country from Israeli distributor Alonyal and retained over 5000 employees of the latter.
McDonald's stated in a statement that it thanks Alonyal for establishing its business and brand in Israel over the past 30 years, and McDonald's remains committed to expanding into the Israeli market. According to the statement, the agreement must meet certain conditions and is expected to be completed in the coming months.
According to a report by securities firm China, shortly after the outbreak of the current Israeli Palestinian conflict, McDonald's Israel branch provided a large amount of free food to the Israeli Defense Forces and police to express support for its crackdown on Hamas. After some military and police officers who received food posted online and took photos, the news attracted media attention.
According to insiders cited by Consumer News and Business Channel (CNBC), the actions of the Israeli branch quickly sparked protests from multiple Muslim countries around the world. Although McDonald's branches in multiple Arab countries have repeatedly stated that they do not support the actions of the Israeli branch and have promised to provide assistance to the Gaza region, McDonald's local sales are still declining month by month, with some dropping as much as 50% to 90%, seriously affecting McDonald's annual revenue and brand value.
CNBC mentioned that since the outbreak of the Israeli Palestinian conflict six months ago, many McDonald's stores in the Middle East have been empty, and even Western brands such as Starbucks have faced resistance from some locals.
McDonald's business has been "significantly impacted"
Analysts have pointed out that McDonald's repurchase of 225 Israeli restaurants will give it more control over its own brand. The above actions of McDonald's may affect the future relationship between the brand and franchisees, and may exert greater control over the behavior of local franchisees to avoid political risks.
Since the outbreak of a new round of Palestinian Israeli conflict on October 7th last year, McDonald's has become one of the most prominent targets of resistance in Muslim countries due to its stance on the conflict and its status as one of the most recognized American brands. In November last year, McDonald's stated in a statement, "We are disappointed with false information and inaccurate reports about our position in dealing with the Middle East conflict. McDonald's has not sponsored or supported any government involved in this conflict, and any actions taken by our local development licensing business partners have been independently taken without McDonald's authorization or approval." However, this has not stopped McDonald's from declining revenue in these countries and regions.
In early January of this year, Chris Kempczinski, CEO of McDonald's, stated that McDonald's business in the Middle East had been "significantly affected" due to the conflict between Israel and Hamas and the "related misleading" of the McDonald's brand.
In February, the two largest catering companies in the United States, McDonald's and Starbucks, both stated that the geopolitical conflict centered around the Israeli Palestinian conflict had damaged their performance at the end of last year and believed that they would continue to suffer negative impacts in the coming quarters. At that time, McDonald's announced its performance for the fourth quarter of 2023. According to the financial report, McDonald's revenue in the fourth quarter of 2023 was $6.41 billion, a year-on-year increase of 8.1% and a month on month decrease of 4.27%, which was lower than market expectations; Global comparable sales increased by 3.4% year-on-year, which is McDonald's slowest growth rate since the fourth quarter of 2020 and lower than the average analyst expectation.
According to the financial report, McDonald's sales in the Middle East declined in the fourth quarter of last year due to its franchisees in Israel offering discounts or free meals to soldiers in the country, which sparked a boycott of McDonald's restaurants by Muslim communities in the Middle East. McDonald's CEO Chris Kempczinski said that due to this impact, the company's sales in Muslim dominated countries such as the Middle East, Malaysia, and Indonesia have been weak, and France, which has the largest Muslim population in Europe, has also experienced the same situation.
McDonald's predicts that sales in the eastern region will not recover until the end of the war. Chris Kempczinski claims that the ongoing impact of this war on the local business of these franchisees is discouraging and unfounded.
A new round of Palestinian Israeli conflict
The deteriorating investment environment in Israel
According to CCTV News, the new round of Israeli Palestinian conflict that has lasted for six months has not only plunged the Gaza Strip into a serious humanitarian crisis, but also seriously impacted the Israeli economy, leading to a sharp deterioration of the country's investment environment and a surge in government spending.
On April 5th local time, the Irish Ministry of Finance announced that Ireland's sovereign wealth fund, the Irish Strategic Investment Fund, will withdraw its investment from multiple Israeli companies. The Irish Ministry of Finance stated that its divestment actions cover Israel's banking and retail industries and will be implemented as soon as possible in the coming weeks to oppose Israel's occupation of Palestinian territory.
In addition, the Norwegian sovereign wealth fund has withdrawn funds from nine Israeli companies in recent years, and as the current Israeli Palestinian conflict continues, the Norwegian sovereign wealth fund has begun a large-scale review of its investments in Israel, which is expected to accelerate its withdrawal speed.
Daily Economic News Comprehensive Securities Company China, 21st Century Economic Report, CCTV News, etc