McDonald's buying back its franchises in Israel as boycott hurt sales

McDonald's Corporation says it will acquire Alonyal, which owns 225 McDonald's restaurants in Israel that have been hit by calls for a boycott over the war with Hamas in Gaza.

Terms of the transaction weren't disclosed. McDonald's said in a statement the deal was subject to conditions it didn't identify.

Alonyal has operated McDonald's restaurants in Israel for more than 30 years. Their 5,000 employees will keep their jobs after the sale, McDonald's said.

In presenting its 2023 earnings report in February, McDonald's said the war in Gaza that began in October with the Hamas attacks on Israel was weighing on its results.

McDonald's was targeted with boycott calls after the franchised restaurants in Israel offered thousands of free meals to Israeli soldiers.

"We recognize that families in their communities in the region continue to be tragically impacted by the war and our thoughts are with them at this time," McDonald's CEO Chris Kempczinski said in an analyst call.

He said the impact of the boycott was "meaningful," without elaborating.

McDonald's fourth quarter sales disappointed analysts. In franchised restaurants outside the U.S., comparable sales fell 0.7 percent.

"Obviously the place that we're seeing the most pronounced impact is in the Middle East. We are seeing some impact in other Muslim countries like Malaysia, Indonesia," said Kempczinski.

This also happened in countries with large Muslim populations such as France, especially in restaurants in heavily Muslim neighborhoods, he said.

McDonald's is one of a number of Western brands that have drawn criticism from pro-Palestinian activists since the war began.

Activists have also targeted Burger King, KFC, Pizza Hut and Starbucks, among other chains.

Starbucks says on its website that rumors that Starbucks financially backs the Israeli government and its military are "unequivocally false." As a public company, Starbucks is required to disclose any corporate giving, it notes.  

In:
• Starbucks
• Israel
• McDonald's
• Gaza Strip