NEW YORK - McDonald’s agreed to acquire its restaurants in Israel from operator Alonyal, bringing the American fast-food chain in-house months after it became a point of contention in the early days of the Israel-Hamas war.

Alonyal launched the McDonald’s brand in Israel more than 30 years ago, and grew the business to 225 restaurants and more than 5,000 employees, according to a statement from the Chicago-based chain.

“McDonald’s remains committed to the Israeli market and to ensuring a positive employee and customer experience in the market going forward,” said Mr Jo Sempels, who leads the McDonald’s segment that oversees international markets with licensed restaurants.

McDonald’s declined to comment on the rationale for the acquisition. The business became the subject of controversy in the wake of the Oct 7 Hamas attack, after photos and videos on Instagram showed franchised stores in Israel giving soldiers free meals. Operators in Saudi Arabia, Malaysia and Pakistan denounced the actions.

Days later, McDonald’s chief executive officer Chris Kempczinski said in a message seen by Bloomberg News that the company “firmly condemns violence and hate speech” and is “deeply disturbed by the acts of anti-semitism and Islamophobia”. The message did not directly address the tensions among franchisees.

McDonald’s fourth-quarter sales missed expectations as growth decelerated, hurt in part by the conflict in the Middle East.

The segment that includes the region, which accounts for about 10 per cent of McDonald’s revenue, fell well short of estimates. Mr Kempczinski had earlier warned about a “meaningful business impact” in the area.

The chain plans to look for a new franchisee for its Israel business in a few months, after the acquisition is completed, according to Israeli economic news website Calcalist, which cited unidentified people involved in the sale.

McDonald’s said the agreement with Alonyal is subject to certain conditions, with closing anticipated in the coming months.
BLOOMBERG