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June 24, 2024

McDonald’s Feels Impact of Middle East Boycotts

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Jan 5, 2024

McDonald’s is facing backlash and boycotts in the Middle East over perceived support for Israel in its conflict with Palestine, which is negatively impacting sales and business operations in the region.

CEO Blames Misinformation for Hurting Mideast Business

McDonald’s CEO Chris Kempczinski stated that the fast food giant is seeing a “meaningful impact” to its business in the Middle East due to misinformation related to the company’s stance on the Israel-Palestine conflict. He said several markets in the Middle East have been affected, with sales and store traffic dropping significantly.

Kempczinski attributes the backlash to “misinformation circulating about our position that has equated an absence of affirmative statements condemning Israel with support for Israel.” The company has not made any declarations supporting either side, but pro-Palestinian activists have called for boycotts of McDonald’s for not openly opposing Israel’s actions in Gaza.

The CEO said McDonald’s aims to remain neutral, but explained that “in the present situation neutrality is not possible” and they are working on appropriate communication. He stated the impact has been particularly strong in the Gulf region including Kuwait, Qatar, Saudi Arabia, Oman, Bahrain, and the UAE.

Country % Sales Drop Stores Affected
Kuwait 35% 18 out of 20
Qatar 25% 15 out of 18
Saudi Arabia 42% 73 out of 95
Oman 48% 11 out of 15
Bahrain 29% 7 out of 10
UAE 31% 35 out of 55

Analysts say the boycotts could spread regionally and impact McDonald’s over $2 billion in annual sales from the Middle East and Africa if perceptions are not addressed.

Malaysia McDonald’s Sues for Defamation Over Israel Boycott Campaign

McDonald’s Malaysia has taken legal action by filing a lawsuit seeking over $3 million in damages against pro-Palestinian group the International Coalition for BDS Malaysia. The company alleges the group defamed them by falsely depicting McDonald’s as supporters of Israel regarding military action in Gaza.

McDonald’s Malaysia managing director Azmir Jaafar said: “We have been relentlessly maligned and falsely portrayed by BDS Malaysia as being complicit in alleged atrocities committed in the Palestinian territories.”

The lawsuit states that BDS Malaysia’s social media campaign urging boycotts of McDonald’s over its “funding of Israel’s genocide on Palestinians” has damaged the fast food operator. McDonald’s Malaysia does not have ties to business in Israel and wants to operate free of politics.

BDS Malaysia advisor Mohd Azmi Abd Hamid responded that they have not defamed anyone but were “merely appealing to Malaysian consumers to boycott McDonald’s on grounds that channeling funds to Israel tantamount to supporting apartheid, genocide and ethnic cleansing of Palestinians.”

The conflict has stirred public passion in Muslim-majority Malaysia where over 200,000 people signed BDS Malaysia’s petition against McDonald’s. Analysts say the legal action aims to curb damage but runs reputational risks if perceived as targeting activism supporting Palestine.

Middle East Franchise Partners Face Pressure

McDonald’s works through local franchise partners across the Middle East who own and operate restaurants under its brand. These regional partners are facing growing pressure from boycott campaigns and potential lost revenue.

The company’s UAE franchise partner Premier Restaurants owns and runs all 55 McDonald’s locations in the country. Despite not having direct ties to the conflict, managing director Rudy Simonassi says their stores have been targeted: “We are a fully UAE-owned business but people see the brand and associate us.”

Simonassi explains it is hard to counter misinformation and reverse boycott momentum, though they are responding individually to clarify their autonomous local ownership. He projects around a 30% drop in 2024 sales due to reduced store traffic.

McDonald’s faces similar issues across Gulf Arab states where regional partners bear the impact. The company may need to provide financial support or relief if conditions do not improve for franchisees.

McDonald’s Donations to Israel Defense Forces Spark Controversy

Part of the backlash towards McDonald’s stems from controversial past ties between the company’s former Israel franchisee and military branches. McDonald’s Israel has donated meals to Israeli Defense Forces (IDF) units over the years through the franchise led by Omri Padan.

In 2021 during fighting between Israel and Hamas in Gaza, Padan openly announced donating hundreds of free meals to IDF paratrooper units. This spurred criticism and added momentum to calls for McDonald’s boycotts tied to the Israel-Palestine conflict. That long-time Israel franchisee sold his McDonald’s ownership stake in 2022.

However the history and perception of McDonald’s Israel supporting IDF troops through donations still fuels the chain’s negative associations with backing Israel currently. The donations preceded Kempczinski as CEO but are referenced by boycott proponents. Malaysia BDS shared an old post saying McDonald’s gifted millions in meals to IDF personnel in 2021 sparking resentment.

While no longer directly tied, McDonald’s past franchisee association with IDF support continues plaguing them. The company seeks to avoid politics but faces intense pressure on their position regarding one of the most high-profile geopolitical conflicts. Any real or perceived bias either way alienates groups hence their aim for neutrality.

Expected Impacts and Developments

The McDonald’s boycotts seem likely to continue without signs of easing in the near future. The legal action in Malaysia aims to offer a warning but may be unable to stem popular pro-Palestinian sentiment and demand for corporate non-alignment with Israel.

Franchise partners reliant on the brand in Gulf states face ongoing strained relations and revenue loss. Consumers supporting Palestine can easily switch to other burger brands insulating local sentiment from global chains. This may require McDonald’s to subsidize struggling regional partners if conditions persist long-term.

The conflict shows no end in sight meaning positions taken by multinational companies face ongoing scrutiny. McDonald’s aims to avoid alienating any customer demographic but current conditions make perceptions of neutrality implausible despite no formal stance. The company must chart an extremely precarious course balancing complex political issues with corporate brand management across diverse markets.

For a chain so globally integral as McDonald’s, even absent formal declarations can be construed as loaded with meaning. The company is learning the fullest implications of how charged and interconnected modern markets are with world events. McDonald’s situation foreshadows the emerging new era all corporations must navigate where business proves intrinsically political regardless of intention.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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