- Written by Chris Newlands
- business reporter
McDonald's sudden decision to take over ownership of its Israeli branches has put franchise company Aronyar and its chief executive Omri Padan in the spotlight.
McDonald's plans to buy back all of its Israeli restaurants after global sales slumped after the brand was boycotted over perceived support for Israel in the war against Hamas in Gaza. .
The fast food giant uses a franchise system, meaning individual operators are licensed to operate their stores and employ staff. However, the company came under criticism after Padan provided free meals to Israeli troops around the start of the Israel-Gaza war on October 7.
The boycott came after Muslim-majority countries such as Kuwait, Malaysia and Pakistan issued statements distancing themselves from the company, viewing it as supporting Israel.
But Padan is not new to controversy related to the Israeli-Palestinian conflict. The businessman has been at the center of numerous conflicts during the 30 years he has operated McDonald's restaurants in Israel.
image source, Getty Images
In 2013, the Israeli businessman infuriated Israel's settler movement by rejecting calls to open a branch of his fast-food chain in the occupied West Bank's Ariel settlement. Mr. Padan's company, Aronyaru, was asked to open a restaurant in a shopping center, but the company declined, saying it had a policy of staying away from occupied territory.
The company said at the time that the decision had not been coordinated with McDonald's headquarters in the United States.
Since Israel captured the West Bank and East Jerusalem (land that Palestinians want as part of a future state) in the 1967 Middle East war, it has established about 160 settlements, home to about 700,000 Jews. We have built the land.
A majority of the international community considers the settlements to be illegal under international law, but Israel disputes this.
Padan is one of the founders of Peace Now, an organization that opposes all settlements and views them as obstacles to peace. Peace Now says he is no longer a member of the group, which was founded in 1978.
Leaders of the settlers' umbrella organization, the Yesha Council, said at the time that McDonald's had transformed from a for-profit company to a company with “anti-Israel political objectives.”
Aronyar's decision surfaced again in 2019 when McDonald's won a bid to operate a restaurant and hot dog stand at Israel's Ben Gurion Airport.
In response, West Bank settlement leaders sent several letters of protest, calling on the Ministry of Finance, the Ministry of Transport, and the Israeli Airports Authority to block the move. Protests also took place outside a fast food chain in Tel Aviv.
Then, on Thursday, it was suddenly announced that Aronial would be selling its vast franchise to an American food giant.
McDonald's has not disclosed the terms of the deal, but a reputation management expert who has worked on behalf of many large companies and did not want to discuss the record said he was outraged by the decision to provide free meals to Israelis. Those who were there said: Powers may be “angry that the deal could potentially make Mr. Padan very rich.”
But they may be satisfied with the effect their boycott has had.
Padan's resignation comes after McDonald's announced that the Israel-Gaza conflict had a “material impact” on its performance in certain overseas markets in the fourth quarter of 2023.
The division's sales growth rate for the fourth quarter of 2023, which includes the Middle East, China and India, was only 0.7%, far below market expectations.
Earlier this year, McDonald's CEO Chris Kempczinski blamed the backlash on “misinformation.”
The company, which relies on thousands of independent companies to own and operate most of its more than 40,000 stores around the world, said the boycott was “disheartening and baseless.” Approximately 5% are located in the Middle East.
A brand management expert said: “I get it. They're trying to buy back the franchise to get back control, but I don't know if that's really going to happen.”
They also questioned where the company draws the line. [McDonald’s] Should we take action and propose deals in other areas where reputational damage is occurring? ”
On Thursday, McDonald's said it “remains committed to the Israeli market and ensuring a positive experience for our employees and customers there.”
While thanking Aronyar for building the brand in Israel, Padan said he was “encouraged by what's to come.”
BBC News was not able to obtain further comment from Mr Padan or Mr Aronyar through McDonald's.
