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Goodbye Golden Arches: rebranded McDonald’s stores reopen in Russia

Employees take part in preparations before the opening of a new restaurant. (Source: Reuters/Evgenia Novozhenina)

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

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.

A banner with the logo of the new restaurant chain that will replace McDonald’s after the US company sold its restaurants in Russia to one of its local licensees, Alexander Govor. (Reuters/Evgenia Novozhenina.)

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 February 24.

McDonald’s iconic ‘Golden Arches’ have been taken down at sites in Moscow and St Petersburg, where they will make way for the new brand Vkusno & Tochka and its logo comprising two orange fries and a hamburger patty against a green background. The name translates as “Tasty and that’s it”.

The reopening will initially cover 15 locations in Moscow and the surrounding region.

Headwinds

Govor has said he plans to expand the new brand to 1000 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 per cent of its nearly 850 restaurants across Russia and it took a charge of up to US$1.4 billion following the sale to Govor, whose GiD LLC had previously run 25 restaurants.

Oleg Paroev, chief executive of Vkusno & Tochka, (and the previous CEO of McDonald’s Russia) said the company was planning to reopen 200 restaurants by the end of June and all 850 by the end of the summer.

“Our goal is that our guests do not notice a difference either in quality or ambience,” Paroev told a media conference in what used to be the first McDonald’s restaurant that opened in Soviet Moscow in 1990.

Alexander Govor, the new owner of the chain, said the company employs 51,000 people.

“The corporation asked me to, first of all, keep the headcount, to provide people with work. That’s what I’m going to do,” he added.

The rebranded fast-food chain will keep its old McDonald’s interior but will expunge any references to its old name, said Paroev.

He said the company would keep “affordable prices” but did not rule out that they would go up slightly in the near term.

McDonald’s last year generated about 9 per cent, or US$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.

Reporting by Reuters; Editing by Matt Scuffham, Gareth Jones and Pravin Char of Reuters, and Inside Retail.

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