Malaysian boycott hits US restaurant brands

Kuala Lumpur (Reuters) - The boycott of some US restaurant chains by Malaysian activist groups over Israel's invasion of the Gaza Strip has had an impact on the companies and the business environment in Malaysia, including Starbucks starting to cut staff and KFC temporarily closing more than 100 outlets.

Following the outbreak of the Israeli-Palestinian conflict in October, the Malaysian pro-Palestinian rights group Boycott, Divestment and Sanctions Movement (BDS) called for a boycott of US restaurant chains such as McDonald's, KFC and Starbucks, accusing them of supporting Israel's invasion of Gaza. McDonald's took legal action against the organizations involved, and the two sides are currently in settlement talks. Starbucks is laying off workers as revenue drops 40%, and KFC has closed more than 100 stores.

Other ngos and influencer groups have followed suit, calling for boycotts of about 120 brands, including Coca-Cola, Nestle and Grab. The boycott against most brands fizzled out after a few months, but boycotts against McDonald's, KFC and Starbucks continued.

McDonald's Malaysia franchisee Gerbang Alaf Restaurants Corporation (GAR) filed a lawsuit against BDS for RM6 million (S $1.72 million) on Dec 19 last year. The two sides are still in settlement talks.

Socgen, an investment bank, reported in December that Starbucks had seen a 30-40% drop in customer traffic after two months of boycotts, while its rivals had not.

Shares in Successful Foods, which owns the Starbucks franchise in Malaysia, fell more than 20%. In the second quarter of this year, Success Foods saw a 38.2% drop in revenue and a net loss of RM42.58 million. Venture capital experts believe Starbucks may cut jobs to reduce costs.

According to unofficial statistics, since October last year, KFC has suspended business in 108 branches, accounting for about 14% of the total number of branches. As of July last year, KFC had 770 outlets in Malaysia.

According to Google Maps, Kelantan has the largest number of suspended branches with 21. The others are 15 in Johor, 11 in Kedah, 11 in Selangor, 10 in Terengganu, 10 in Pahang, nine in Perak, six in Sembilan, five in Penang, three in Kuala Lumpur, two each in Perlis City, Malacca and Sarawak, and one in Sabah.

McDonald's Malaysia franchisee Gerbang Alaf Restaurants Corporation (GAR) filed a lawsuit against BDS for RM6 million (S $1.72 million) on Dec 19 last year. The two sides are still in settlement talks.

KFC has always been popular with the Malay community, but the suspension of KFC outlets, 50 percent or 54 of the Malay majority in Kelantan, Terengganu, Kedah, Perlis City and Pahang, it is believed that the boycott wave over the past few months is one of the reasons.

QSR Brand, the franchisee of KFC in Malaysia, has yet to respond to a request for comment.

The boycott by some US restaurant chains has hit these companies and the business environment in Malaysia, including Starbucks starting to lay off staff and KFC temporarily closing more than 100 outlets.