June 20, 2024

Unitranche

Supportive Business Potential

‘Sale of McDonald’s Israel is an earthquake in the business world’

‘Sale of McDonald’s Israel is an earthquake in the business world’

“It’s hard for me to believe that the chain would decide to terminate its operations in Israel, it’s an event on a level that President Biden will have to address. This whole event is puzzling. Perhaps someone at McDonald’s headquarters in Illinois doesn’t understand the implications for the Israeli public,” said a senior figure in the business world following McDonald’s Global’s decision to acquire the franchise in Israel from Omri Padan, who brought the fast food chain to the country over 30 years ago.

“This is earthquake-like. I’ve been in the international franchise business for many years, and I don’t recall a case where the chain acquired the local franchisee rather than the other way around,” he continued.

“Usually, the chain doesn’t announce ownership changes before finding an alternative franchisee. It wouldn’t surprise me if, in a few months, we find out that some investment fund from Abu Dhabi or the Emirates acquired the franchise, maybe in partnership with a British fund,” said the source.

Another industry insider takes the story in a different direction. “Omri Padan is 72 years old, and it may be that he got tired and it’s time for him to step down. He has always been an independent franchisee who stood by his opinions against the global chain and was not deterred by controversies,” the source said.

“He’s one of the few who succeeded in convincing the chain to adapt the menu to the Israeli palate and grill the burgers instead of frying them. He refused to open branches beyond the West Bank. Today he’s a billionaire and owns, among other things, a hotel in Mykonos and a share of one in France. Maybe he just cashed out. It’s not easy to operate a chain on such a scale. It may be that disagreements over the war prompted him to say, ‘Take it, the keys are on the table’.”

“I find it hard to believe this move aims to prevent actions like donations to the IDF. If so, the chain faces a catch-22. Refusing donations or benefits to soldiers would provoke public outrage and boycotts in Israel. I can’t see the chain wanting to inherit such a problem and maintain ownership. They’re likely to sell to a fund or an investor. There’s probably already a line of interested Israeli parties, given the franchise’s high value.”

The last time McDonald’s Israel published financial data was in 2018, during a petition by competitor Burger Ranch, reporting a turnover of NIS 900 million ($243 million) from 186 branches. Now owning 225 branches, it’s estimated that its revenue reaches NIS 1.6 billion ($432 million)