McDonald's buys all of its Israeli franchise restaurants amid damage from Middle East turmoil

The “Golden Arches" of McDonald's in the Israeli Dead Sea resort town of Ein Bokek, pictured in March 2021. (Emmanuel Dunand/AFP/Getty Images/File via CNN Newsource)

LONDON — McDonald's will buy every one of its 225 franchise restaurants in Israel, it announced Thursday, just weeks after saying that the Israel-Hamas war was hurting its business.

The fast food giant said it had struck an agreement with Israeli franchise Alonyal to buy the firm's McDonald's (MCD) franchise restaurants in the country.

Omri Padan, CEO and owner of Alonyal, said in a statement: "For more than 30 years, Alonyal Limited has been proud to bring the Golden Arches to Israel and serve our communities." Alonyal employs more than 5,000 people across its McDonald's restaurants in the country.

McDonald's added in the statement that it "remains committed to the Israeli market and to ensuring a positive employee and customer experience in the market going forward."

The terms of the deal were not disclosed.

The vast majority of McDonald's stores around the world are run by local franchise operators. These operators act in many ways as independent businesses: They set wages and prices and, when they feel appropriate, make statements or donations at their discretion.

That approach has helped make McDonald's a global phenomenon, with over 41,000 restaurants worldwide as of 2023. But it also means the US company can't dictate how each operator should respond in a crisis.

In the aftermath of attacks on October 7, in which Hamas militants killed more than 1,200 Israeli soldiers and civilians and kidnapped some 200 more, Alonyal offered discounts to local soldiers and security forces.

Many McDonald's operators in the wider region quickly distanced themselves from the Israeli firm's actions. Franchise groups in Kuwait and Pakistan, for example, issued statements saying they did not share ownership with the Israeli franchise.

Like other American brands, McDonald's has been hit by boycotts in several markets in the region.

In January, CEO Chris Kempczinski said the company was experiencing a "meaningful business impact" in the Middle East because of the war between Israel and Hamas. During its latest earnings presentation in February, McDonald's reiterated that message and said the conflict would likely continue to weigh on its business.

In his January statement, Kempczinski appeared to emphasize the company's neutrality, saying: "In every country where we operate, including in Muslim countries, McDonald's is proudly represented by local owner operators."