Burger King unable to leave Russia as partner ‘refused’ to close shops
The owner of Burger King has not been able to shut down its Russia operations as the independent operator of its 800 stores in the country has “refused” to close the sites.
The president of Restaurant Brands International (RBI) (QSR), which owns Burger King and has operated its restaurants in Russia for a decade in a joint venture which includes Alexander Kolobov, said the company was attempting to withdraw from the Russian market following the invasion of Ukraine.
But in a letter to employees, David Shear, RBI's president for international operations, highlighted the complications involved in trying to stop operations.
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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," Shear wrote.
"Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today?" he wrote. "No."
Shear added that making any changes to its local Burger King business "would ultimately require the support of Russian authorities on the ground and we know that will not practically happen anytime soon".
RBI entered Russia a decade ago through a joint venture partnership with three entities: Kolobov, who controls day-to-day operations, private equity and asset management firm Investment Capital Ukraine, and Russia's state-owned VTB Bank (VTBR.ME).
VTB Bank has been sanctioned by the UK, the US and numerous European countries over the invasion.
Shear said the company has begun the process of disposing of its 15% ownership stake in the joint venture and has stopped supporting the supply chain, operations and marketing for Russia.
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“We suspended all corporate support for the Russian market, including operations, marketing, and supply chain support in addition to refusing approvals for new investment and expansion.”
Western companies remain under pressure to withdraw from Russia following its attack on Ukraine. But Burger King is not alone in not being able to exit the country.
Marks & Spencer (MKS.L) and hotel groups Marriott (MAR) and Accor (AC.PA) are also restricted by complex franchise deals preventing them from withdrawing.