McDonald's will buy all 225 of its Israeli restaurants after the fallout from the boycott

McDonald's The US fast food company has signed a deal to buy all 225 restaurants that make up its franchise in Israel, the US fast food chain announced, months after sales fell dramatically due to pro-Palestinian boycott measures amid the war between Israel and Hamas.

Restaurant outlets in Israel are owned by the locally licensed Alonial Ltd., which has been owned by Israeli businessman Omri Badan, for more than 30 years.

“An agreement has been signed to sell Alonial to McDonald’s,” McDonald’s said in a statement on Thursday. “Upon completion of the transaction, McDonald's Corporation will own Alonial LLC's restaurants and operations, and employees will be retained on similar terms.” The company did not disclose the purchase amount.

McDonald's reported its first revenue loss in nearly four years in February, hurt by weak sales growth in its Middle East division.

Consumers around the world, especially in Arab and Muslim-majority countries, have boycotted the brand over what they see as support for Israel – which the chain's management denies – in the wake of the Israeli franchise's move to offer free McDonald's meals to Israeli soldiers next. Hamas-led terrorist attacks on October 7 that killed nearly 1,200 people in Israel and took another 253 hostage.

The war between Israel and Hamas led to the deaths of at least 33,000 people in the besieged Gaza Strip, according to the Ministry of Health in the Strip, and the conflict led to what the United Nations and the World Health Organization warn of imminent famine for more than half a million people.

In January, McDonald's CEO Chris Kempczinski described a “meaningful business impact” in the chain's Middle East market and some countries outside the region, such as Muslim-majority Malaysia and Indonesia, as a result of the war and what he called “associated misinformation” about the war. Company.

“We are appalled by the misinformation and inaccurate reporting regarding our position in response to the conflict in the Middle East,” McDonald's said in a statement in November.

“McDonald's Corporation does not fund or support any governments involved in this conflict, and any actions by our local commercial development license partners were taken independently without McDonald's content or approval.”

McDonald's wrote in a regulatory filing in February that it is “monitoring the evolving situation, which it expects will continue to have a negative impact on system-wide sales and revenues as long as the war continues.”

The burger giant's franchises in several Muslim countries including Saudi Arabia, Turkey, Oman, the United Arab Emirates, Kuwait and Jordan have published statements attempting to distance themselves from the Israeli franchise while also pledging money and aid to Gaza.

However, it did little to help; According to two sources familiar with the matter, sales at McDonald's franchises in several Arab countries fell by between 50% and 90% per month following the boycott.

In Lebanon, protesters attacked and vandalized local McDonald's restaurants, and crowds of pro-Palestinian demonstrators in London surrounded some branches of the chain chanting “Shame on you.”

McDonald's Saudi Arabia said in a statement in October: “Regarding the news that McDonald's in Israel was donating meals, we confirm that it was an individual decision on their part.” He added: “Neither McDonald's International nor us nor any other country had a role or relationship with this decision, neither directly nor indirectly.”

The company's stock price is down 10% year to date, and is down 5.5% compared to this time last year.

Buying McDonald's “will give it more control over its brand, following losses associated with the actions of the Israeli franchisee,” Monica Marks, a professor of Middle East politics at New York University Abu Dhabi, wrote in a post on X.

She suggested that the McDonald's story could influence relationships between the brand and its franchisees in the future.

“One lesson I expect McDonald's and other global brands to learn from the boycott and disputes between Israel and Palestine is that they may look to exercise greater control over the actions of local franchisees which could be interpreted as a politicized lightning rod in initial franchise contracts.”

In the six months following the October 7 attacks and the Israeli attack on Gaza, many McDonald's restaurants across the Arab world, which normally see strong influxes of customers, have remained largely empty. In Dubai, restaurants that previously received long queues and crowds of delivery drivers late at night saw empty parking lots.

“I'm sure local Arab McDonald's franchisees are breathing a sigh of relief today,” Marks said. “Their actions, which had nothing to do with Alonial’s decision to provide free meals to the Israeli army in October, have been hit hard here in the MENA region by the boycott.”

The McDonald's boycott initiative has sparked further boycotts of major Western brands including… Starbucks, Which also saw a significant decline in revenue from the Middle East after the Seattle-based coffee chain sued the United Workers Union over a pro-Palestinian message it posted online. In a statement on its website, Starbucks called suggestions that it supports the Israeli government in any way “unequivocally false.”

It seems that this statement fell on deaf ears. Alshaya Group, the Starbucks franchise operator in the Middle East and North Africa, announced in early March that it would lay off 2,000 workers at its regional stores – roughly 10% of its workforce – due to “ongoing difficult trading conditions” caused by the boycott. .