McDonald's is reclaiming all its Israeli restaurants, exposing the cracks in its global franchise model

• McDonald's plans to buy back all 225 of its restaurants in Israel from its long-standing franchisee.
• Israeli stores stridently back the Israeli military, which sparked boycotts in other markets.
• It highlights a flaw in the global franchise model, where local strategies can become a liability.

McDonald's announced on Thursday that it would buy back all 225 franchise restaurants in Israel, taking direct control.

The company said in a news release that it had reached an agreement with Alonyal, the franchisee that has run its Israeli stories for the past 30 years.

The intervention is meant to blunt the impact of a global boycott of McDonald's and other Western corporations perceived to support Israel's military action in Gaza.

Israel's invasion was launched after the October 7 terror attacks, when Hamas militants killed an estimated 1,200 Israelis and took more than 250 hostages.

Since then, more than 33,000 Palestinians have been killed in Israel's bombing spree, according to Gaza's Hamas-run Health Ministry.

In October, the McDonald's franchisee in Israel caused controversy by giving thousands of free meals to Israel Defense Forces personnel participating in the conflict.

Although McDonald's doesn't have a formal position on the war, some observers took it as a sign that McDonald's was taking Israel's side.

This prompted McDonald's franchisees in other countries, such as Saudi Arabia, Oman, Kuwait, and the United Arab Emirates, to distance themselves from the Israeli operation, per Reuters.

The pro-Palestinian Boycott, Divestment, and Sanctions (BDS) movement called for a global boycott of McDonald's until it severed ties with the Israeli franchisee.

Thursday's news showed that the campaign worked.

McDonald's has said the boycott hit its bottom line. In February, it reported missing a key sales target, attributing it partly to events in Israel.

Blowback from the conflict "meaningfully impacted" performance in France, Indonesia, and Malaysia, CEO Chris Kempczinski said in February.

A month prior, Kempczinski sought to defend the company, saying the backlash was "ill-founded," and based on "misinformation."

He defended McDonald's approach of giving leeway to local operations, saying the company was "proudly represented by local owner-operators" globally.

However, the Israeli situation exposed a key flaw in a franchise model that spans more than 100 countries.

Franchisees like Alonyal have the autonomy to make decisions tailored to the local market while still representing the world-famous brand.

This makes room for crucial concessions to local tastes and customers.

For instance, Indian franchises don't sell beef burgers, and bacon isn't on sale in Israel and the majority-Muslim world.

On the flipside, generally, consumers don't differentiate between the various operations, and, like with Israel, may take one franchisee's actions as a global stance and punish the brand accordingly.

(For the same reason, McDonald's taking back the Israeli stores may not make much difference to the people involved in the boycotts.)

In the statement announcing the Alonyal deal, Jo Sempels, the head of McDonald's international developmental licensed markets, said that the company was still "committed to the Israeli market."