Business
McDonald’s Says Middle East Turmoil Is Hurting Its Business
McDonald’s stated rising Middle Eastern tensions hurt its operations.
The burger restaurant, which reported increased overall sales and earnings in the fourth quarter, stated that foreign tensions were weighing on regional sales and that the business is watching the situation.
The Middle East accounts for only a small portion of its total business. McDonald’s mostly licences its brand to independent enterprises in the region, and the company stated that it provides some financial support in the form of royalty relief or deferred cash collection.
McDonald’s Says Middle East Turmoil Is Hurting Its Business
McDonald’s noted that it provided modest financial support to franchisees affected by the Middle East conflict. However, due to the tensions, sales in its licenced markets sector, which includes most Middle Eastern corporations, increased by only 0.7% in the latest quarter. This was far poorer than the more than 4% growth in the United States and other overseas enterprises.
The licenced markets business was its best-performing unit last year, with sales increasing by more than 16%.
Overall, global sales at McDonald’s outlets open for at least a year increased 3.4% in the fourth quarter, lower than analysts predicted, as protests against the firm in the Middle East took their toll. That also hurt company sales, which increased to $6.41 billion but fell slightly short of estimates.
McDonald’s Says Middle East Turmoil Is Hurting Its Business
McDonald’s (MCD) stock declined marginally in premarket trade.
Last month, McDonald’s stated that the battle between Israel and Hamas is having a “meaningful business impact” in the Middle East, following Starbucks in publishing public remarks to dispel misconceptions and boycotts impacting the brands.
Following the October 7 Hamas strikes on Israel, McDonald’s Israel distributed thousands of complimentary dinners, according to social media reports. Many regional McDonald’s operators soon distanced themselves from the Israeli franchisee’s activities. Franchise groups in Kuwait, Pakistan, and other countries published statements claiming they did not share ownership of the Israeli franchise.
Local franchise owners operate the great majority of McDonald’s restaurants. These operators operate in many respects, like independent enterprises, setting wages and prices and making statements or donations as they see fit. That approach has helped McDonald’s become a global phenomenon, with over 40,000 locations worldwide, including approximately 27,000 outside the United States, as of 2022.
Price increases, an increase in delivery and digital orders, and creative marketing of some of its menu items, such as the Grimace milkshake, which went viral, all helped McDonald’s largest market, the United States, see a 4.3% increase in sales.
McDonald’s Says Middle East Turmoil Is Hurting Its Business
Although US sales were broadly in line with estimates, fourth-quarter sales were lower than the 8.1% recorded for the prior quarter in October.
Overall revenue for 2023 increased 10% over the previous year, with McDonald’s reporting $25.49 billion over $23.18 billion in 2022.
CEO Chris Kempczinski stated that the company remains “confident in the resilience of our business amid macroeconomic challenges that will persist in 2024.”
SOURCE – (CNN)
