McDonald's forced to buy all 225 Israeli franchise restaurants amid boycotts

McDonald's has announced that it will buy Alonyal's 30-year-old Israel franchise, taking ownership back of 225 locations that employ over 5,000 people.  

Since Alonyal declared it would be providing free meals to the Israeli soldiers shortly after the October 7 bombing by the Palestinian group Hamas, the US fast-food business has been the target of boycotts and protests. 

Although McDonald's is a worldwide corporation, its franchises frequently have local ownership and run independently. The Israeli war on Gaza, according to the company's CEO Chris Kempczinski, has had "meaningful business impact" in several Middle Eastern and international markets.  

“For more than 30 years, Alonyal Limited has been proud to bring the Golden Arches to Israel and serve our communities,” Omri Padan, CEO and owner of Alonyal, said in a statement on Thursday. 

McDonald’s added that it “remains committed to the Israeli market and to ensuring a positive employee and customer experience in the market going forward”. 

After the completion of the transaction in the coming months, McDonald’s will own Alonyal’s outlets and operations while retaining its employees. The companies did not disclose the terms of the transaction. 

Kempczinski stated in February that the war had a "disheartening" impact on sales in countries with a Muslim majority, like Malaysia and Indonesia, as well as in the Middle East. 

"What's happening is a human tragedy, and I believe that affects brands like ours." 

The fast-food chain's Middle East, China, and India segment had sales growth of just 0.7% from October to December, much below the 5.5 percent market projections.  

The decline coincides with the call for a boycott of McDonald's by customers in Muslim-majority nations following Alonyal's announcement. This led to franchisees in Egypt, Jordan, and Saudi Arabia distancing themselves from the donations and jointly pledging millions of dollars in aid to the Palestinians in Gaza.  

While Chicago-based McDonald’s is known as one of the United States’ most iconic brands, most of its restaurants worldwide are locally owned and operated. 

Another major Western fast-food chain Starbucks has also seen boycott campaigns over its perceived pro-Israeli stance and alleged financial ties to Israel. 

Starbucks witnessed a "significant impact on traffic and sales" in the Middle East as well as in the US, as protesters campaigned against the Seattle-based firm, demanding that it take a stand against Israel, as CEO Laxman Narasimhan told journalists in February.  

Pizza chain Domino's, established in the US and having franchises all over the world, also experienced backlash after social media posts implied without providing proof that it had also provided free food to Israeli soldiers. 

The brand’s same-store sales dipped by 8.9 percent in Asia in the second half of 2023, mainly because consumers in Malaysia associated it with the US, an Israeli ally, a company official said.