McDonald's to Purchase Israel Franchise Amid Sales Slump and Boycott Backlash

After months of declining sales due to pro-Palestinian boycott action amid the Israel-Hamas war, McDonald's Corporation has signed a deal to acquire all 225 outlets of its Israel franchise. The franchise has been owned by local licensee Alonyal Limited, owned by Israeli businessman Omri Padan, for over 30 years. The acquisition is set to have a significant impact on the fast-food chain's operations in the region and beyond.

New Ownership and Operational Continuity

On Thursday, McDonald's Corporation announced the signing of an agreement to purchase Alonyal Limited. Following the completion of the transaction, McDonald's Corporation will take over the ownership of the restaurants and operations, with a commitment to retain the existing employees on equivalent terms. The purchase amount has not been disclosed at this time.

Revenue Miss and Global Boycott

In February, McDonald's reported its first revenue miss in nearly four years, attributing it to weak sales growth in the division that includes the Middle East. The brand has faced global boycotts, particularly in Arab and Muslim-majority countries, due to perceived support for Israel. This perception was fueled by the Israel franchise's provision of free meals to Israeli soldiers after the Hamas-led terror attacks, leading to a drastic drop in sales.

Impact of the Israel-Hamas Conflict

The Israel-Hamas conflict has taken a toll on both sides, with approximately 1,200 people killed in Israel and over 32,000 in the blockaded Gaza Strip. The situation has raised concerns of an impending famine for more than half a million people, as warned by the U.N. and World Health Organization.

Response from McDonald's

McDonald's CEO Chris Kempczinski acknowledged a significant business impact in the Middle East market and other regions due to the conflict and what the company termed as "associated misinformation." McDonald's Corporation emphasized that it does not fund or support any governments involved in the conflict, and any actions from its local Developmental Licensee business partners were made independently without McDonald's content or approval.

Franchisees' Efforts and Sales Plunge

Franchisees in several Muslim countries, including Saudi Arabia, Turkey, Oman, the United Arab Emirates, Kuwait, and Jordan, attempted to distance themselves from the Israeli franchise. They also pledged funds and aid to Gaza. However, sales for McDonald's franchises in these countries reportedly plummeted by 50% to 90% month-on-month following the boycott.