McDonald’s, Starbucks and other chains recently announced the temporary closure of restaurants in Russia.
McDonald’s made the first fast food appeal and says it could lose $50 million a month.
The fast food industry still relies on McDonald’s for big decisions.
Some of the world’s largest fast food companies announced plans to suspend operations in Russia on March 8 following the lawsuit Russian attacks on Ukraine. McDonald’s CEO Chris Kempczinski told workers and customers in a letter on Tuesday, and Starbucks, Daddy Johns, Yum Brandsand Burger King followed shortly thereafter.
As each company had to consider its own financial situation, McDonald’s was the first major voice in the industry to take a stand. The giant burger chain takes a “prominent place” in fast food, essentially paving the way for all other chains to follow its lead, Kalinowski Equity Research President and CEO Mark Kalinowski told Insider.
McDonald’s “made the decision for other companies a lot easier,” he told Insider. McDonald’s has nearly 850 locations in Russia, and Russian and Ukrainian locations combined account for about 9% of revenue and 3% of operating profit, the company said. Chief Financial Officer Kevin Ozan told CNBC that the the closures will cost McDonald’s an estimated $50 million a month.
Once McDonald’s makes a public decision, fast food competitors could do their own math.
“While McDonald’s is going to take an operating profit hit for a while” over its relatively large presence in Russia, other chains with less impacted earnings can make that move with less risk, Kalinowski said. “From a public relations perspective, it makes sense,” he told Insider.
The industry’s progressive response to follow McDonald’s lead shows that despite all the changes in fast food over the past decades, McDonald’s remains the biggest decision maker. Other chains tend to defer to McDonald’s, Kalinowski said.
McDonald’s is often the first chain to take action that is eventually adopted by others in the industry. McDonald’s was largely responsible for the popularity and widespread use of drive-thru after launch of its first versions in the 1970s. Burger King adopted drive-thru soon after, and Starbucks added them in the 1990s.
Over the next few decades, drive-thru became crucial to fast food. Before the pandemic, drive-thru comprised 70% of McDonald’s orders and jumped up more than 90% after the onset of COVID-19and drive-thru became also the key to Starbucks’ business.
McDonald’s isn’t always the very first chain to embrace advances in fast food, but it often does so on a scale that changes the entire landscape and leads to subsequent adoption by other chains. McDonald’s added dual drive-thru lanes to hundreds of locations across the United States, and they have since become the industry standard. He followed the same pattern with control terminals with touch screens located in restaurants, now ubiquitous in fast food.
Big brands like Starbucks and KFC and Yum Brands’ Pizza Hut following McDonald’s same-day lead show that the old guard is still in charge in fast food.
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Read the original article at Business Intern