KFC Malaysia Shutdown: 'Collateral damage' amid McDonald's, Starbucks boycotts? (2024)

Although the number of affected stores wasn't specified, local media indicated that over 100 outlets were temporarily shut down, it added. The franchise has 600 outlets in the country.

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As per a report by The Straits Times, 20 percent of the popular fast-food chain's restaurants are temporarily shut. Malaysian newspaper Nanyang Siang Pau said QSR Brands is shutting 108 KFC outlets. It used information gathered from Google Maps of several eateries, which indicated being “temporarily closed".

The majority-Muslim nation of Malaysia has long supported Palestinians, prompting boycotts against certain Western fast-food brands, including KFC, over Israel's actions in Gaza, the publication said.

BDS Boycott dynamics: KFC not on list, but still hit

Despite not being officially listed by the Boycott, Divestment, Sanctions (BDS) movement, many Malaysians associate all American fast-food chains, including KFC, with links to Israel. And reports said this has hurt business.

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The boycott, which began in October 2023 amid criticism of Israel's military moves in Gaza post-October 7, has led to a shift in KFC's branding strategy, as per The Straits Times.

“KFC is not on the BDS list of targeted companies. But many Malaysians see any American fast-food operator to be related to Israel, including KFC," Professor Mohd Nazari Ismail, chairman of BDS Malaysia, told The Straits Times.

Earlier in the year, McDonald's and Starbucks (corporations on the BDS list) reported significant economic repercussions in regions with effective boycotts. Berjaya Food, owner of 400 Starbucks stores in Malaysia, reported RM42.6 million net losses in October-December 2023. Local papers reported that owner Vincent Tan is “considering going private" with the company.

The report added that the impact of the boycott varies across regions in Malaysia. North-east Kelantan state and Selangor have seen many temporary closures, affecting business operations and employment opportunities.

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What is BDS & how has it impacted brands?

The BDS movement was initiated in 2005 by over 170 Palestinian groups to gain global backing for the rights of the Palestinian people. The official website presents itself as a human rights initiative seeking “freedom, justice and equality" for Palestinians who “are entitled to the same rights as the rest of humanity."

Inspired by the South African anti-apartheid movement, BDS advocates nonviolent pressure on Israel until it complies with international law, focusing on three main demands:

1. Ending its occupation and colonisation of Arab lands and dismantling the West Bank Wall.

2. Recognising the fundamental rights of Arab-Palestinians equal to Israeli citizens.

3. Respecting, protecting, and promoting the rights of Palestinian refugees to return to their homes and properties as stated in UN Resolution 194.

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Amid the ongoing conflict between Israel and Hamas, BDS has called for the boycott of major multinational corporations such as McDonald’s, Puma, Google, Disney, and Amazon. The campaign is primarily aimed at exerting economic and cultural pressure on Israeli brands and brands associated with the country to deter alleged injustice against the Palestinians in Gaza and other occupied territories.

Since October, the BDS list has extended to include several Western brands that have ties significant ties in Israel or have been visibly supportive of Israel and the Israeli Defence Forces (IDF) amid allegations of genocide of Palestinians in Gaza.

Israeli Prime Minister Benjamin Netanyahu had previously associated BDS with anti-Semitism, alleging it promotes hatred towards Jewish people and discriminates against them, as per an Indian Express report. In response, BDS, on their website, said that criticism of Israel's violations of international law should not be equated with anti-Semitism, emphasising that Israel, as a country, is subject to critique like any other.

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Boycott, Economic Difficulties, Operational Challenges

QSR Brands (M) Holdings Bhd, the operator of KFC and Pizza Hut franchises in Malaysia, announced the temporary closures in response to economic difficulties. “QSR Brands and KFC Malaysia have taken proactive measures to close outlets to manage increasing business costs temporarily and focus on high engagement trade zones," it said in a statement late on April 29.

QSR Brands confirmed that employees from these outlets were offered the opportunity to relocate to stores in areas with higher customer traffic. However, as per The Straits Times, many workers still need to be made aware of their future employment. The statement, however, did not address local media reports that businesses suffered due to perceived links to Israel, Reuters added.

The Straits Times quoted a source within QSR as saying that management views this boycott as an opportunity to address the operational challenges faced by some KFC stores in the country.

“To mitigate the impact of the boycott, QSR changed its branding strategy to become more Islamic on its website in the fourth quarter of last year," said the source. They added that menus and fliers stress that KFC Malaysia is owned by the Johor state government's Johor Corporation and employs 30,000 Malaysians, including 86 percent of Muslims.

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Has BDS been successful?

In February, McDonald’s reported that boycott calls on social media and elsewhere severely impacted its sales. In its first quarterly sales miss in nearly four years, the American MNC said weak sales in the Middle East, China and India were responsible, the Guardian reported.

As per the BBC, sales growth in these regions during October-December was just 0.7 percent – much below market expectations of 5.5 percent.

In January, the CEO of McDonald’s, Chris Kempczinski, said they saw “meaningful business impact" in the Middle East market and some areas outside the region due to the Israel-Hamas war and “associated misinformation", as per the Guardian.

The boycott call came after McDonald’s Israel shared on social media that it had donated 4,000 meals to IDF-dedicated hospitals and military units. The company had said it planned to donate thousands of meals every day to soldiers in the field and drafting areas, besides giving a discount to soldiers who came into the restaurants, as per a Mint report in October.

In a bid to mitigate the damage, McDonald's announced on April 5 that it will buy and take ownership of all 225 outlets in Israel from franchisee Alonyal, Al Jazeera reported.

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Another American brand impacted is Starbucks, whose CEO Laxman Narasimhan acknowledged in February that the company experienced a noticeable decline in both footfall and revenue in the Middle East and the United States, Al Jazeera said.

Protesters in the US urged the Seattle-based company to take a clear stance against Israel. In December 2023, the company lost around $11 billion in value, erasing 9.4 percent amid boycott calls.

Within 19 calendar days of its November 16 Red Cup Day promotion, Starbucks shares plummeted 8.96 percent, which equates to an about $11 billion loss, amid analysts' reports of slowing sales and a subdued response to the holiday season's offerings.

Similarly, Domino’s, a US-headquartered pizza chain with outlets globally, saw same-store sales fall 8.9 percent in Asia during the latter part of 2023. An official attributed this decline to Malaysian consumers associating the brand with the US, an ally of Israel.

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Published: 30 Apr 2024, 01:53 PM IST