- March 17, 2022
As the fast-food chain moves to divest, a Burger King partner in Russia refuses to close 800 stores.
- Burger King is selling a 15 percent share in its Russian business.
- However, the burger chain informed employees in an open letter that due to a joint venture agreement, it is unable to immediately cease operations in the market.
- Last Monday, Restaurant Brands International stated that all corporate assistance for its 800+ franchised sites in Russia will be suspended.
Burger King is looking to sell its 15 percent investment in its Russian business, but the company says it can't legally shut down operations in the market right away.
In reaction to the Kremlin's escalating attacks on Ukraine, the Restaurant Brands International company said last week that it was suspending all corporate assistance for its 800-plus franchised outlets in Russia. The suspension includes denials of new investment or expansion, as well as a halt to operations, marketing, and supply chain.
However, in an open letter to staff on Thursday, the company's International President David Shear explained that the nature of the company's Russian business makes it difficult for it to close outlets in the market like some of its competitors.
"Would we wish to immediately cease all Burger King operations in Russia?" Yes. Are we able to put a halt to operations right now? "No," Shear stated emphatically.
Burger King entered Russia through a joint venture with businessman Alexander Kolobov, Investment Capital Ukraine, and VTB Capital, a subsidiary of a large Russian bank that has been sanctioned by the US.
Shear said the burger company called Kolobov, who is in charge of the Russian sites' day-to-day operations and management, and "demanded the suspension of Burger King restaurant operations in Russia. "Kolobov refused, according to Shear.
Burger King holds a 15% ownership in the joint venture, with none of the other partners holding a majority position. Burger King, according to Shear, is unable to shut down the operation on its own.
He stated, "There are no legal stipulations that allow us to unilaterally amend the contract or allow any of the partners to simply walk away or invalidate the entire arrangement." "In any industry in the world, no serious investor would agree to a long-term commercial agreement with flimsy termination clauses."
Shear said the company has begun the process of selling its part in the joint venture, but the procedure would take time to complete according to the terms of the deal. Burger King, he added, is in complete compliance with all applicable sanctions.
Because of the ongoing conflict and relations with the West, enforcing Burger King's contract would require the cooperation of Russian authorities, which is unlikely to happen anytime soon.