Analysis: McDonald’s bows to pressure, acquires all 225 franchise restaurants in Israel
Analysis: McDonald’s bows to pressure, acquires all 225 franchise restaurants in Israel
Amid the outbreak of the war in Gaza following Hamas’ murderous attack on Israel on October 7th, McDonald's came under pressure after Omri Padan, the franchisee of McDonald's Israel, donated free meals to IDF soldiers. This led to threats of boycotts by pro-Palestinians in the Middle East and other regions, resulting in a sales slowdown
Omri Padan, the franchisee of McDonald's Israel, announced on Thursday the sale of the franchise to McDonald's. Following the completion of the deal in a few months, McDonald's will seek a new franchisee to replace Padan. The fast-food chain, which currently operates 225 branches in Israel with 5,000 employees, will continue to operate under McDonald's Global ownership. The agreement is subject to certain conditions to be finalized in the coming months.
In recent months, amid the outbreak of the war in Gaza following Hamas’ murderous attack on Israel on October 7th, McDonald's came under pressure after Padan, like many Israeli businessmen, donated free meals to IDF soldiers. This led to threats of boycotts by pro-Palestinians in the Middle East and other regions, resulting in a sales slowdown. The purchase of the franchise by the global company is seen by industry sources as a response to the war's negative impact on revenues. McDonald's aims to regain control of the Israeli chain's operations and potentially cease donations to the IDF to safeguard its image and finances.
Its CEO Chris Kempczinski had said in January the company has seen "meaningful impact" in several markets in the Middle East and some outside the region due to the Israel-Hamas conflict.
Padan, the owner and CEO of Alonyal Ltd., received the McDonald's franchise in 1992 and opened the first branch in Israel in 1993. In 2013, Padan sparked controversy by refusing to open a branch in Ariel, located across the Green Line.
"For more than 30 years, Alonyal Limited has been proud to bring the Golden Arches to Israel and serve our communities," Padan said in a statement.
"McDonald's remains committed to the Israeli market and to ensuring a positive employee and customer experience in the market going forward," Jo Sempels, president of International Developmental Licensed Markets, said on Thursday.
In February, McDonald's released its fourth-quarter 2023 reports, attributing missed forecasts partly to the Gaza war's negative impact on sales. The war led to a decline in customer numbers and calls for boycotts both in and outside the Middle East. Growth slowed to 3.4% in the fourth quarter, below analysts' forecasts of 4.7%.
