In Minsk, a McDonald’s May End Up Mincemeat

Belarus, the Soviet throwback sandwiched between Russia and Poland, is resisting efforts by McDonald’s to turn it into a fast-food nation.

The fast-food giant filed a lawsuit this month in a land dispute with authorities--the latest in a string of problems it has had since it opened for business in Belarus in 1996.

Authorities in the capital, Minsk, leased a prime location near Belarus State University and a train station to McDonald’s for 39 years, and the chain built a restaurant on it--one of six it has opened in the nation. However, the city later ruled that the university could use the same site, and officials intend to build a school of international relations there.

McDonald’s would have to close for two years during construction. If--or when--the restaurant reopens, it would be surrounded by the university building. McDonald’s officials say they are seeking compensation for lost revenue during construction.

If this were an argument on what is better for young people--burgers and fries or education--the answer would be clear to many. But it is far from that simple.

Critics see the case as an illustration of the hazards of doing business in Belarus, where authorities have often broken deals with foreign investors. Corporations such as Ford Motor Co. have simply walked away from multimillion-dollar investments.

McDonald’s is still considered a remarkable institution by many in Belarus, population 10 million. Provincial folk arriving in Minsk flock to the disputed restaurant directly from the adjacent train station. Families line up for photos in front of it.

But for all the wide-eyed admiration, the company also has many detractors in the city administration, the Health Ministry and Belarus State University.

Among its opponents are the “Grill Brothers,” a group of disaffected former employees of the hamburger giant who use their own McDonald’s slang and run a pithy Web site berating the company for its treatment of young workers, its low pay and its management style.

The disputed restaurant now languishes behind a 6-foot-high metal fence. The 100-yard detour to find the gate has deterred many customers, the company says. Worse lies ahead. After the two-year closure during construction of the school of international relations, the restaurant will be encircled by the new building and will be invisible from the railway square.

The company’s manager in Belarus, Natalya Zygmont, declined to be interviewed for this article. Its press officer, Olga Troyan, would not say how much money the company is seeking in damages.

The World Bank reported in January that Belarus was one of the least reformed of the former Soviet states. President Alexander G. Lukashenko has shunned reform, and small business has failed to put down strong roots.

Svetlana Kalinkina, deputy editor of the Belorusskaya Delovaya Gazeta, a business paper, said the McDonald’s case typifies the problems faced by foreign investors in Belarus.

“A lot of foreign investors, big and small, have realized that it is virtually impossible to do business in Belarus,” she said. “Too many people in power in Belarus continue to think that it is possible to turn the country into a small Cuba right in the heart of Europe and survive with the help of domestic resources.”

The dispute is only one of many McDonald’s has faced in Belarus.

First, Belarus authorities insisted that McDonald’s use only local beef and potatoes. McDonald’s managed to convince them that it needed to import 70% of the ingredients from Russia.

Next, in 1997, authorities in Minsk ruled that the university could build on land leased to McDonald’s because it originally was university land.

Last May, the Belarus Health Ministry declared that McDonald’s food was bad for people’s health. It advised people to eat traditional Belarussian food, which, like Russian cuisine, is heavy in fat and carbohydrates. Fried potatoes are a much-loved accompaniment.

In a country where the courts often reflect the views of authorities, Minsk city officials appeared disdainful of McDonald’s legal action.

Vyacheslav Kushner, deputy mayor of Minsk, said that McDonald’s should never have been granted a lease to operate on university land and that the hamburger giant has made no attempt to compromise.

“They could have easily found a way out: Either make a deal with the university, or find another place to move their restaurant,” he said. “They could have easily avoided this conflict. Instead, today McDonald’s is ready to fight on the barricades. It is a very stupid situation.

“Besides this, they need to clearly realize that the university is more important to us than a fast-food restaurant,” he added.

Alexander Kozulin, university rector, said that the school offered to build a new McDonald’s building on one of four other sites, but that the company refused.

“We are normal people. We are not barbarians, but no matter what we offer them, they never accept it,” he said. He accused McDonald’s of breaking promises to offer students discounted meals and to sponsor some university programs, claims denied by the company.

“McDonald’s has taught us a very good lesson, and we are grateful to them for it,” Kozulin said. “We now know that even the biggest and best-known transnational corporations are not to be trusted.”

Troyan, the McDonald’s spokeswoman, said the university’s building plans infringe on the company’s property rights and the fence restricts access to the site.

“This fence has become a strong psychological deterrent for our clients,” she said, but she declined to provide a figure for the company’s losses.

Troyan said McDonald’s was prepared to accept the university expansion but wanted compensation for its losses in the two years the restaurant would be closed.

She said the amount of compensation McDonald’s was seeking would not cover its losses. “We have done so much, but we got nothing in return,” she said. “Instead, they put up this fence.”

Belarus attracts only a trickle of foreign investment, despite its cheap labor and ideal location between Russia and Europe. Its own industries are foundering: Nearly half of all companies, mainly large, unreformed Soviet-era dinosaurs, are broke, according to March figures from the Belarus Statistics Ministry.

Ford set up a minivan plant in 1996 but pulled the plug on its $19-million investment two years ago when Lukashenko’s government reneged on a tax break.

The Russian beer company Baltika struck a deal last year with Lukashenko to invest millions in a state-owned brewery in return for a controlling stake, then demanded its money back when the deal did not materialize. The dispute is unresolved.

The McDonald’s dispute has upset even some of those who dislike the fast-food giant. Valery Manyuk, a 19-year-old student, worked for a year at another McDonald’s in Minsk and said managers there treated their staff poorly.

“Everyone who does his job well at McDonald’s today does it not because they love their job,” he said. “They do it for fear of being fired.”

Manyuk said that when he first heard about the problems faced by the disputed McDonald’s, he felt a surge of glee, but then he thought of what it meant for his country.

“As a citizen of Belarus, I am disappointed. If such huge companies as that are tortured by the authorities, it means we can have little hope of a better future in this country. The McDonald’s situation shows that Belarus remains a hopeless case.”

Alexei V. Kuznetsov of The Times’ Moscow Bureau contributed to this report.