Gaza boycott forces McDonald's to assume control of Israel franchise that gave free meals to Israeli soldiers

McDonald's Corporation said Thursday it will acquire Alonyal, which owns 225 McDonald's restaurants in Israel which have been hit by calls for a boycott over the Israeli military's war in Gaza.

Terms of the transaction were not disclosed. McDonald's said in a statement the deal was subject to conditions which it did not identify.

Alonyal has operated McDonald's restaurants in Israel for more than 30 years, today owning 225 franchised properties with more than 5,000 employees, who will be retained after the sale.

In presenting its 2023 earnings report in February, McDonald's said the war in Gaza that began in October with the Hamas attacks on Israel was weighing on its results.

McDonald's was targeted with boycott calls after the franchised restaurants in Israel offered thousands of free meals to Israeli soldiers.

"We recognize that families in their communities in the region continue to be tragically impacted by the war and our thoughts are with them at this time," Chief Executive Chris Kempczinski said in an analyst call.

He said the impact of the boycott was "meaningful," without elaborating.

McDonald's fourth quarter sales disappointed analysts. In franchised restaurants outside the United States, comparable sales fell 0.7 percent.

"Obviously the place that we're seeing the most pronounced impact is in the Middle East. We are seeing some impact in other Muslim countries like Malaysia, Indonesia," said Kempczinski.

This also happened in countries with large Muslim populations such as France, especially for restaurants in heavily Muslim neighbourhoods, he said.

McDonald's shares were down nearly 2 percent in after-market trading Thursday.