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McDonald's Will Rename And Sell Its Outlets In Russia To A Local Operator

McDonald's Will Rename And Sell Its Outlets In Russia To A Local Operator
McDonald's Corp said on Thursday that it is selling its restaurants in Russia to one of its current local licensees, who would rebrand them under a new name, putting an end to more than three decades of the "Golden Arches" in the nation.
In Russia, the world's largest burger company controls 84 per cent of its almost 850 locations. Following Russia's February invasion of Ukraine, McDonald's, located in Chicago, became one of the most well-known worldwide businesses to leave the country. McDonald's has stated that it will keep its trademarks.
McDonald's temporarily shut down its restaurants in Russia in March, including its first facility in Pushkin Square, a symbol of American capitalism blossoming in the ashes of the Soviet Union. McDonald's came to symbolise a de-escalation of Cold War hostilities, as well as a way for millions of people to enjoy Western cuisine and culture.
Alexander Govor, who oversees the franchise operation through his company GiD LLC, will buy the McDonald's outlets in Russia. Govor has been a McDonald's franchisee since 2015, and his 25 shops in distant Siberia have helped the brand develop.
McDonald's and GiD declined to provide the deal's financial details. McDonald's had previously stated that a sale would result in a non-cash charge of up to $1.4 billion.
Govor will keep staff for at least two years on comparable conditions, according to McDonald's, and will pay salaries in 45 Russian areas until the sale is completed, which is likely in the coming weeks.
Denis Manturov, Russia's Industry and Trade Minister, said the agreement was reached after a "long and arduous" negotiation process, and that the government will provide Govor with all necessary assistance in establishing operations.
Govor was identified as a co-owner of Siberian Distribution Centre, a leasing company, and the Anzherskiy Oil Refinery in the Interfax Spark database of Russian companies. According to the database, Govor also has a 50% investment in a minor forestry firm and a 25 per cent stake in a fishing and hunting company.
Earlier in the day, local media reported that SPP, one of Russia's major McDonald's franchises, was a possible buyer. Kairat Boranbayev, the company's owner, owns a McDonald's franchise in Kazakhstan and Belarus.
No comment was available on the issue from SPP.
Several other Western companies, such as Imperial Brands and Shell, have agreed to sell or transfer over their Russian businesses to local managers.
It was unclear how the McDonald's deal would affect the company's other main franchisee, Rosinter Locations , or whether Rosinter would have to rename the McDonald's restaurants it operates. Rosinter remained silent.
Russians were invited to submit name choices to Russia's industry and trade ministry.
"Write your versions in the comments!" the ministry wrote on its Telegram channel. "We will pass on the most creative and interesting ones to the Russian owner."
"MakDak" was a popular early suggestion among Telegram users.
American lawyers are gloomy about the ability of companies like McDonald's to enforce their trademarks in Russia, citing recent Russian acts that they claim violate Western intellectual property rights.
A government directive issued in March has been widely understood as granting Russians royalty-free access to patents owned by entities from "unfriendly" countries such as the United States, the United Kingdom, and the European Union.
Later that month, a Russian court dismissed a trademark dispute filed by the British owner of the children's character "Peppa Pig," citing the country's actions against Russia.
According to Josh Gerben, a trademark attorney of the Gerben Law Firm in Washington, the chances of McDonald's preserving its trademarks in Russia after departing are "low to none."
"It's always been a sketchy place," Gerben said. "Now, it's no longer sketchy, it's treacherous and dangerous."
"Russia does not have a balanced rule of law where both parties can be equally protected," international franchise consultant William Edwards said. "It's always been that the government, courts, companies and mafia are against you, but otherwise you've got a good chance."
Reports that the Russian government may confiscate trademarks were "outright untrue," according to Vladimir Biriulin, a Moscow-based partner at the law firm Gorodissky & Partners, who added that McDonald's would have "no difficulty" enforcing its rights if that were required.

Christopher J. Mitchell

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