In the past several weeks, multiple quick-service giants such as McDonald’s, Starbucks, and Yum! Brands have shuttered stores and company operations in Russia due to the conflict with Ukraine.
Restaurant Brands International, which has 800 franchised Burger King restaurants in the country, has yet to close, but not through a lack of effort.
David Shear, RBI’s international president, explained in an open letter that the company entered Russia 10 years ago through a joint venture with multiple partners, including Alexander Kolobov, who is responsible for day-to-day operations and oversight of the hundreds of stores. None of the partners have majority share; RBI’s piece is 15 percent.
RBI halted all corporate support for the Russia market, including operations, marketing, supply chain, and approval for new development. The company also demanded the closure of Burger King restaurants, but Kolobov refused, Shear said.
The brand is now getting rid of its ownership stake, although Shear said it will take some time due to the terms of the joint venture partnership. In addition, RBI is redirecting profits, including its ownership stake, to the United Nations’ refugee agency (UNHCR) and made an immediate $1 million donation toward that commitment. The company is also working with franchisees from more than 25 countries to distribute $2 million worth of meal coupons to nongovernment organizations assisting Ukrainian refugees.
Shear said RBI is unable to unilaterally suspend operations because of extensive commitments to long-term investments and accountabilities.
“There are no legal clauses that allow us to unilaterally change the contract or allow any one of the partners to simply walk away or overturn the entire agreement,” he said in the letter. “No serious investor in any industry in the world would agree to a long-term business relationship with flimsy termination clauses. This is exactly why we say it’s a complicated legal process when we are asked why we can’t just unilaterally shut down the business.”
Any enforcement would require support of Russian authorities, and “we know that will not practically happen anytime soon,” Shear said. RBI is not the only company in this position, either. Papa Johns has recently come under fire after U.S. operator Christopher Wynne refused to close 190 stores in Russia. All the pizza chain can do is temporarily shut down corporate operations and all engagement with the Russian market.
McDonald’s has one of the biggest presences in Russia with 850 units and was able to temporarily shutter all the restaurants. However, unlike RBI and Papa Johns, the burger giant owns 84 percent of the footprint, making the move a lot easier.
“Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today? No,” Shear said. “But we want to be transparent with our actions and explain the steps we have taken to stand with the international business community in response to Russia’s attack on Ukraine and its people.”
