Russia-Ukraine crisis backfire in the US fast-food sector

As sanctions are impacting Russia, operators such as McDonald’s, Papa John’s, KFC, Pizza Hut, Burger King and Starbucks are expected to take the hit for the large exposure in the Russian market.

McDonald’s, Papa John’s, KFC, Pizza Hut, Burger King and Starbucks are all well-known US fast-food operators but their financial performances are expected to take a dive due to their exposure in the Russian market. The two largest players are McDonald’s and Yum! Brands’ KFC — with a total of roughly 1,900 locations. It’s unclear if Russia will move to shutter these US-born fast-food spots as the West deploys sanctions to penalize the country for its invasion of Ukraine. Last week, McDonald’s has declined 8% of its value in the Dow Jones Industrial Index. But it is not the only company that looks for heavy winds ahead.

“The conflict between Russia and Ukraine could adversely impact economic conditions and demand for dining out as well as result in heightened economic sanctions from the U.S., Canada and other countries in a manner that may adversely affect us and our franchisee’s restaurants located in Russia and Eastern Europe,” Burger King mentioned in its annual report released at the end of last week. The brand owns 550 locations in Russia.

“Escalating tensions between Russia and Ukraine could adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic sanctions from the U.S. and the international community in a manner that adversely affects us and our Concepts’ restaurants located in Russia and Eastern Europe, including to the extent that any such sanctions restrict our ability in this region to conduct business with certain suppliers or vendors, and/or to utilize the banking system and repatriate cash,” completed Yum! Brands’ KFC in a similar report recently issued.

And is not just financial restrictions and inflation that are expected to spike in Russia and some other parts of the region but also the disruptions in supply with local products. At the end of last week, MHP, the largest Ukrainian poultry supplier confirmed that exports are totally blocked, activity in its Ukrainian units has been almost shut down and most of the company’s efforts are to focus on securing its employees’ safety and to deliver food to the population, Ukrainian army forces, hospitals and communities put at danger by the terrible conflict started by Russia.