Under pressure, McDonald's to buy back its 225 restaurants from local Israeli franchisee | Here's why

United States-based fast food major McDonald’s has signed an agreement to buy all of the 225 restaurants that make up its franchise in Israel. These outlets are presently owned and operated by Alonyal Limited.

Alonyal, which has managed McDonald’s Israel restaurants for over three decades, said that the deal would be completed in the “coming months”, subject to certain conditions.

What is behind McDonald’s’ move?

The latest trade move from McDonald’s comes after the company’s reputation and sales taking constant hits for months due to boycotts. Customers around the world, and especially in Muslim-majority countries, have been snubbing the fast-food chain for its perceived support of Israel in the Gaza war.

Alonyal spurred off the calls for boycotts in October 2023, days after the Israel-Hamas war began.

How McDonald’s Israel’s actions led to boycotts

In October, McDonald’s’ Israeli franchise had said that it would provide free meals to Israeli soldiers during the ongoing conflict with Hamas.

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The reactions to that news were unfavourable. In neighbouring Lebanon, people held protests and a McDonald’s location was reportedly attacked by pro-Palestine groups.

Then, Muslim-majority countries such as Kuwait, Malaysia and Pakistan distanced themselves from McDonald’s for supporting Israel. Customers in the Middle East began boycotting the firm. Soon, protests spread from the West Asian region to the entire world.

In Bahrain, Egypt, Jordan, Kuwait, Oman, Saudi Arabia, Turkey, and the United Arab Emirates, McDonald’s franchises not only distanced themselves from their Israeli counterpart, but also pledged over $3 million to support Palestinians under bombardment in Gaza.

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A hole in McDonald’s’ pockets

The boycotts did have a strong effect. In January, McDonald’s said that the Israel-Hamas war had “meaningfully impacted” its financial performance. Its businesses in France, Indonesia, and Malaysia were suffering. Trade in the Middle East was the most adversely affected.

The following month, the global food chain said that its international sales rose by only 0.7 per cent in the fourth quarter of 2023. In comparison, its sales had boomed 16.5 per cent during the same period in 2022.

By taking back control of the Israeli business “in-house”, McDonald’s is hoping to restore its reputation in the Middle East and help business flourish once more.