McDonald's Wins Contentious Israeli Airport Contract Despite Settler Campaign

Campaign sought to bar the chain from opening at Ben-Gurion Airport over its refusal to open restaurants in West Bank settlements

FILE Photo: McDonald's employees in a Chicago branch, April 30, 2019.
Nam Y. Huh/AP

McDonald’s Israel overcame objections by settlers and right-wing politicians on Sunday to win a high-profile contract to operate restaurants at Ben-Gurion International Airport.

McDonald’s bid came under fire from some West Bank settler leaders and from Economy and Industry Minister Eli Cohen because owner Omri Padan refuses to open restaurants in West Bank settlements. That, they said, puts him in violation of Israeli anti-boycott legislation.

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In the meantime, a nonprofit organization, the Forum of Disabled IDF Veterans for Israel’s Security, placed signs near McDonald’s restaurants in Tel Aviv declaring them “Area M – an area controlled by a company that boycotts parts of the State of Israel. Entering is tantamount to supporting it.”

In the end, however, the Israel Airports Authority awarded the franchise to McDonald’s Israel, which made a generous 17 million shekel ($4.7 million) bid for the rights to operate restaurants outlets there for seven years, beginning in October, with an optional 24-month extension.

McDonald’s offer was 10 million shekels more than the minimum set by the IAA and far higher than that 11 to 12 million that rival bidders Burger Ranch and Burger King made. Burger Ranch, a local franchise, has had the Ben-Gurion contract for the last eight years. Before that, McDonald’s had the rights from 2000 to 2011.

In addition, TheMarker learned that McDonald’s kicked in another 3 million shekels for rights to operate hamburger stands at Ben-Gurion’s smaller Terminal 1. But the big win for McDonald’s is at Ben-Gurion’s main Terminal 3, wherea big rise in incoming and outgoing tourist traffic have made operating airport restaurants a high-turnover business. Last year, the restaurants at Terminals 1 and 3 did roughly a combined 330 million shekels of business, a 13% increase over 2017. The Burger Ranch outlets alone had about 42 million shekels in sales.

While the contract is a prestigious win for McDonald’s, it may not be a profitable one. In addition to the up-front fee, it will be paying a percentage of turnover as rent to the airports authority, as well as the cost of salaries and ingredients. There are also security, kashrut supervision and other expenses.

One restaurant industry source, who asked not to be named, estimated that McDonald’s Israel would lose 3 million shekels a year at Ben-Gurion. But, he added, that most of the restaurants at the airport have lost money, too.