Over 25 years of operation, McDonald's has become a landmark company for Ukraine, its return to the market in the fall of 2022 was awaited by a large number of Ukrainian consumers.
The beginning of development in Ukraine
The first McDonald's restaurant in Ukraine was opened on May 24, 1997 in Kyiv near the Lukyanivka metro station.
The next day, another restaurant was opened on Sevastopol Square, and soon three more - on Poshtova Square, Khreshchatyk and near Livoberezhna metro station.
Initially, the hamburger price was about two hryvnias, and Big Mac was about seven. At that time, the hryvnia exchange rate against the dollar was equal to about 1.85 hryvnias per 1 dollar, i.e., in usd terms, the price of a hamburger was a little more than one dollar (by the way, as of mid-December 2022, the price of a hamburger in dollars has hardly changed, and the price of a Big Mac has even decreased).
In the following years, the company actively developed in Ukraine. In the first ten years of operation, McDonald's invested more than $80 million in development, opening more than fifty establishments.
As of the beginning of 2007, the chain had 56 restaurants (of which 22 were located in Kyiv, the others, as a rule, in other major cities of Ukraine). At that time, McDonald's planned to reach the mark of 100 restaurants in 5-7 years.
Unfortunately, because of the crisis of 2008, the annexation of Crimea, and the hostilities in the east of Ukraine in 2014-2015, these plans have been adjusted several times. The company continued its development (at least one new restaurant was opened every year), but at a much slower pace than planned (the mark of 100 restaurants was reached only in 2021).
Activity in Ukraine is managed directly by the group itself - namely, the company "McDonald's Ukraine Ltd".
In Ukraine, McDonald's does not use a franchise scheme at all, in contrast to global development - among the group's 40,031 restaurants operating in more than 100 countries as of the end of 2021, 37,295 or 93% worked as franchised ones.
Another feature of the company's Ukrainian restaurants is that they do not sell beer (as is done in some other countries of the world). In 2003, a pilot project was launched, but the company refused to further develop it - in the eyes of Ukrainian consumers, McDonald's restaurants are primarily family-focused.
Most popular in Ukraine have always been restaurants near the railway stations in Kyiv and Odesa. Traditionally, they are among the most visited McDonald's restaurants in the world.
Also, back in 2014, the company showed itself to be very attentive to the US sanctions policy.
After the annexation of Crimea by Russia in 2014, McDonald's immediately closed its restaurants located on the peninsula (in Yalta, Simferopol, and Sevastopol).
The company also lost five fast-food outlets in the Donetsk and Luhansk regions. In general, in 2014, the company lost 15% of its turnover (but even under these conditions, a net loss of McDonald's in Ukraine in 2014 amounted to only UAH 70 million, while one year later net profit exceeded UAH 100 million).
By the way, regarding the profitability of work in Ukraine, in an interview with the "Ze Interviewer" project in Y2021, the CEO of McDonald's Ukraine, Yuliya Batritdinova, noted that all restaurants in the country are profitable.
McDonald's suppliers in Ukraine
As for relations with suppliers, the main factors of cooperation are stability, quality, and efficiency.
The list of main suppliers has been stable for decades. 60% of suppliers are Ukrainian manufacturers (about 50 companies as of the beginning of 2022).
Some suppliers belong to large international groups.
Since 2003, meat has been supplied from the Kozyatinsky meat processing plant by the company Osi Food Solutions Ukraine, which is part of the international holding Osi Group (one of the main partners of McDonald's worldwide since 1955, the revenue of Osi Food Solutions Ukraine in 2021 was UAH 1.1 billion).
The supplier of buns is the company Bimbo QSR, which belongs to the international group Grupo Bimbo with headquarters in Mexico (until 2017, Ukrainian production operated under the brand name of the American company East Bolt, which was later bought for $650 million by the above-mentioned Mexican group). The company's production facilities are located in Dnipro, in 2021 its total revenue amounted to UAH 310 million.
A significant part of supplies is realized by well-known Ukrainian manufacturers.
The supplier of dairy products for McDonald's Ukraine is Bilotserkivskyi dairy plant (which is part of the Terra Food Group, the owner of which is Ukrainian businessman Stanislav Voytovych), eggs - Ovostar company, juice - T.B. Fruit, ketchup (before the start of a large-scale russian invasion in February 2022) - Chumak.
The main product imported to Ukraine for the needs of the network is potatoes (imported from Poland).
Financial performance of McDonald's in Ukraine and the group as a whole
In Ukraine, McDonald's developed using its own funds, without attracting credit resources.
McDonald's Ukraine revenues dynamics during last several years looked as follows:
As for profitability, in recent years the company's gross margin averaged about 50%. Operating profitability was also at a good level - in the last few years, the EBITDA margin was about 15%.
In recent years, the net profit of McDonald's Ukraine has demonstrated positive dynamics - if in 2016 it amounted to about 300 million UAH, then in 2019 - already 960 million UAH, in 2020 - 715 million UAH (despite the negative impact of coronavirus lockdowns).
Globally, McDonald's belongs to the TOP-50 biggest companies in the world - as of mid-December 2022, its capitalization was $194 billion. In 2021, the group's consolidated revenue was $23 billion - 21% higher than in the previous year. 42% of the total revenue came from sales of restaurants directly managed by the company, and the rest was from franchise income.
Total sales of all restaurants (both owned and franchised) in Y2021 made $112 bln.
The group's operating profit in 2021 amounted to $10 billion, net profit - $7.5 billion.
McDonald's pays a lot of dividends. In 2020, their amount comprised $3.7 billion, and in 2021 - $3.9 billion.
As of the end of 2021, with the total book value of McDonald's assets at $53.6 billion, McDonald's long-term debt amounted to $35.6 billion, and another $13 billion were future lease obligations. The book value of equity was negative.
So the group's capitalization reflects its ability to generate positive cash flows in the future and reflects the value of the McDonald's brand (the company is worth much more than its assets).
Active development and new plans
Considering the good financial results of the company in Ukraine since 2016, and the growth of the purchasing power of the Ukrainian population over the past few years, McDonald's had quite ambitious plans for its further expansion.
The amount of investment that the company planned to make in its development in 2021 was $41 million (for comparison, about $300 million was invested in the previous 20 years, or an average of $15 million per annum).
The development was indeed very active - if by the end of 2020 there were 97 fast food restaurants in the network, by the end of 2021 there were 109.
On May 21, 2021, the hundredth McDonald's restaurant in Ukraine was opened in Nikolsky shopping center in Kharkiv. It should also be noted that in 2021, the first restaurant in Ukraine opened, located along the highway (in the village of Gora, Boryspil district, Kyiv region).
The company planned to further develop this direction and held negotiations with Ukrainian gas stations operators about opening restaurants at their premises. The OKKO network was named as the most likely potential partner for the development of this project.
After the start of full-scale Russian aggression in February 2022, McDonald's immediately closed all its restaurants in Ukraine. At the same time, the company continued to support its employees and to pay them wages.
At the same time, unlike some competitors (for example, the KFC chain, which resumed work in Ukraine in spring 2022), McDonald's was in no hurry to restart business under martial law. Only in August, rumors began to spread about the resumption of work of restaurants in Kyiv. The first restaurants reopened on September 20 and initially operated only in delivery mode (using the Glovo service).
The gradual restoration of the chain's fast food operations took several months, and as of the end of December 2022, 64 McDonald’s restaurants were operating in Ukraine.
Finally, we would like to specially note the company's exit from russia. On March 14, the company closed its 850 restaurants in the aggressor country, and already on May 16 it announced its complete withdrawal from the russian market. McDonald's losses from this move are estimated at more than $1 billion, but despite this fact, for the first nine months of 2022, the group's net profit made $4.3 billion.