Burger King doesn't want one franchisee to have it his way as the two clash over whether to shutter 800 restaurants in Russia.
After Burger King announced it would halt all corporate support of market operations to protest the Kremlin’s attacks on Ukraine, one of the company’s business partners dug in its heels, refusing to comply with the corporate directive to close more than 800 restaurants in the country. Because the restaurant chain operates through a joint venture partnership within Russia, partners can make decisions regarding the day-to-day business decisions of the separate establishments over the stated objections of Burger King.
“We started the process to dispose our ownership stake in the business,” said David Shear, president of Restaurant Brands International, which owns Burger King. “While we would like to do this immediately, it is clear that it will take some time to do so based on the terms of our existing joint venture agreement.”
The corporation is now engaging in a “complicated legal process” to suspend its operations fully as a result of the refusal of the owner, Russian businessman Alexander Kolobov, to shutter the restaurants under his purview, Shear said.
THE COMPANIES BAILING ON RUSSIA OVER ITS INVASION OF UKRAINE
Other companies have also faced challenges in halting business entirely within the country due to contracts with independent franchisees. Almost 200 Papa John’s restaurants remain open in Russia, with the owner noting he plans to expand over the next year.
“Any current attempt to enforce our contract would ultimately require the support of Russian authorities on the ground, and we know that will not practically happen anytime soon,” Shear said of the difficulty of enforcing corporate guidelines. “This is also why you may see other brands in Russia with similar structures continue to operate in the market.”
The corporation plans to redirect any profits to the United Nations’s refugee agency and toward distributing meal coupons to Ukrainians who have fled the country, Shear said.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
The burger chain was one of several companies to announce a suspension of business in Russia amid similar actions from Starbucks, McDonald’s, and Coca-Cola. The United States and several other countries have also imposed sanctions on Russia, causing the value of the country’s currency to collapse by the end of February.