Goodbye Golden Arches: rebranded McDonald's to reopen in Russia

Sunday marks a new dawn for Russia's fast-food lovers as former McDonald's Corp restaurants reopen under new branding and ownership, more than three decades after the arrival of the hugely popular Western fast food chain.

A worker dismantles the McDonald's Golden Arches while removing the logo signage from a drive-through restaurant of McDonald's in the town of Kingisepp in the Leningrad region, Russia June 8, 2022. REUTERS

Workers use a crane to dismantle the McDonald's Golden Arches while removing the logo signage from a drive-through restaurant of McDonald's in the town of Kingisepp in the Leningrad region, Russia June 8, 2022. REUTERS

The relaunch will begin on Russia Day, a patriotic holiday celebrating the country's independence, at the same flagship location in Moscow's Pushkin Square where McDonald's first opened in Russia in January 1990.

In the early 1990s, as the Soviet Union crumbled, McDonald's came to embody a thawing of Cold War tensions and was a vehicle for millions of Russians to sample American food and culture. The brand's exit is now a powerful symbol of how Russia and the West are once again turning their backs on each other.

McDonald's last month said it was selling its restaurants in Russia to one of its local licensees, Alexander Govor. The deal marked one of the most high-profile business departures since Russia sent tens of thousands of troops into Ukraine on Feb 24.

Workers use a crane to dismantle the McDonald's Golden Arches while removing the logo signage from a drive-through restaurant of McDonald's in the town of Kingisepp in the Leningrad region, Russia June 8, 2022. REUTERS

McDonald's iconic 'Golden Arches' have been taken down at sites in Moscow and St Petersburg, where they will make way for a new logo comprising two fries and a hamburger patty against a green background. The reopening will initially cover 15 locations in Moscow and the surrounding region.

HEADWINDS

Govor has said he plans to expand the new brand, which has yet to be named, to 1,000 locations across the country and reopen all the chain's restaurants within two months. But there may be some headwinds.

It takes decades to build a brand, said Peter Gabrielsson, Professor of International Marketing at Finland's University of Vaasa, and the new launch is crucial for the brand's future success.

"Opening day is important because it is the first time consumers can really feel and touch and see the brand and what it stands for," he said. "It's important what the reaction will be and obviously people will be comparing it to McDonald's."

McDonald's, the world's largest burger chain, had owned 84% of its nearly 850 restaurants across Russia and it took a charge of up to $1.4 billion following the sale to Govor, whose GiD LLC had previously run 25 restaurants.

Oleg Paroev of McDonald's Russia has said other franchisees would have the option of working under the new brand, but the traditional McDonald's brand will leave the country. McDonald's has said it will retain its trademarks.

McDonald's last year generated about 9%, or $2 billion, of its revenue from Russia and Ukraine. McDonald's has the right to buy its Russia restaurants back within 15 years, but many terms of the sale to Govor remain unclear.

The TASS news agency said on Wednesday McDonald's would stay open as usual at airports and train stations in Moscow and St Petersburg until 2023, quoting a source close to Rosinter Restaurants, another franchisee.

"Rosinter has a unique agreement under which the American corporation cannot take the franchise away. They can operate in peace," TASS quoted the source as saying.

Rosinter declined to comment. McDonald's did not immediately respond.