The owner of Burger King has said the operator of its 800 stores in Russia has “refused” to close them, despite its demand to suspend trading after the invasion of Ukraine.
Last week, Burger King, which is owned by Restaurant Brands International (RBI), said it had suspended all supply chain, operational and marketing support for the Russian operation.
RBI has been unable to close the operations directly, as rivals such as McDonald’s have done, because of a complicated legal contract with its main franchisee partner, Alexander Kolobov, with whom it has run the joint venture in Russia for a decade.
“We contacted the main operator of the business and demanded the suspension of Burger King restaurant operations in Russia,” said David Shear, the president of RBI, in a statement and letter to staff. “He has refused to do so. Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today? No.”
Burger King is one of a number of western companies, including Marks & Spencer and the hotel groups Marriott and Accor, that are prevented by complex franchise deals from withdrawing.
RBI said it is attempting to sell its 15% stake in the Russian operation. Shear said that any profits from the business, and its ownership stake, have been redirected to the United Nations’ refugee agency (UNHCR).
“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. “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.”
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
Burger King’s main franchisee in Russia is Kolobov – the main day-to-day operator of the business – but other partners include Investment Capital Ukraine and VTB Capital, part of the state-owned VTB Bank, Russia’s second-largest bank, which has been subjected to western sanctions.
Shears said any attempt to try to force termination at this time would require the support of the Russian authorities.
“We know that will not practically happen any time soon,” he said. “This is also why you may see other brands in Russia with similar structures continue to operate in the market.”
M&S stores are operated by a Turkish company called FiBA, which has held the rights to sell the retailer’s products across eastern Europe since 1999. M&S has suspended all shipments of goods to FiBA, which operates 48 stores in Russia.