McDonald's hit by boycott calls after Israel-Hamas war

Photo: Reuters 

McDonald's, a brand known for its burgers, says rising tensions in the Middle East are hurting its business. In its sales and earnings report for the fourth quarter of last year, the company gave an overall good business picture but reported that sales of products in the Middle East region suffered.

According to a CNN report, the Middle East's share of McDonald's overall business is not very high. Several largely independent companies in the region operate under license from McDonald's. McDonald's said that they have provided some financial support to those franchisees by way of royalty discounts or license fee deferrals to cover the loss of these businesses.

McDonald's also said that the situation in the Middle East is being monitored. They said that they would provide financial assistance due to the war, but they did not disclose the exact amount of money that was given. McDonald's, however, said the amount of assistance is not much.

Many partners of McDonald's do business under license around the world. Middle East business is a part of that. The company's growth in this business was 0.7 percent due to tensions in the Middle East. Compared to that, their growth in US and other international businesses has been more than 4 percent. That is, their business in the Middle East has not been good at all.

Just a year ago, licensed business was the busiest for McDonald's. At that time their growth was more than 16 percent.

McDonald's restaurants opened at least a year ago, with sales growth of 3.4 percent in the fourth quarter. The total volume of sales was much lower than what market analysts had expected. And the main reason for this is the protests against the company in the Middle East.

For the same reason, McDonald's earnings were not as expected. The company's revenue for this quarter was $6.41 billion. McDonald's shares fell slightly before trading on the stock market after the financial results were announced.

Last month, McDonald's said it was seeing a "meaningful business impact" in the Middle East due to the war between Israel and Hamas. Starbucks, another big company, suffered a similar loss in business. The two companies also issued statements to dispel misconceptions about them and against calls to boycott their products.

McDonald's Israel distributed thousands of free burgers after Hamas attacked Israel on October 7 last year. After the news spread on social media, many McDonald's merchants in the Middle East region distanced themselves from the Israeli branch's operations. McDonald's franchisees in Kuwait, Pakistan, and other countries have issued statements stating that they have no ownership relationship with the Israeli franchise.

A large number of McDonald's local restaurants operate on a franchise basis. These franchisees operate their business largely independently. They fix the wages of the workers and the prices of the products. They make statements or provide financial assistance if deemed necessary.

This business strategy helped McDonald's to spread all over the world. As of 2022, they have 40,000 restaurants worldwide. 27 thousand of them are outside the United States.