Burger King Franchise Refuses to Close 800 Russian Stores – BK Can’t Force Them

Burger King’s parent corporation, Restaurant Brands International (RBI), announced recently that it would put on hold supply chain, functional and advertising and marketing assistance for any one of its chains in Russia as a result of the country’s ongoing army problem with Ukraine. But Burger King can not put on hold operations at 800 locations in Russia as a result of a legal agreement with its main franchisee partner.
On March 10, RBI launched a statement stating there were no corporate Burger King Restaurants in Russia as well as that all procedures were franchised and managed by a neighborhood “master franchisee.”

“Burger King has suspended all of its corporate support for the Russian market, including operations, marketing and supply chain in addition to refusing approvals for investment and expansion,” RBI said.

Alexander Kolobov, the primary Russian Burger King franchisee, has actually dealt with the business for  more than a decade via a joint venture collaboration. He rejected RBI’s demand to put on hold the operation of his Burger King restaurants, which number over 800 in overall.

David Shear, the president of RBI, told employees in an open letter that the company had been “been working around the clock to do all the right things.”

He noted that along with its partnership with Kolobov, RBI also had a joint endeavor partnership with Investment Capital Ukraine and VTB Capital. RBI has a minority risk (15%) and also none of the partners have a commanding majority share…

VTB Capital belongs to VTB Bank, the second-largest financial institution in Russia. Shear claimed that they are following all western sanctions released against the Russian Government.

“Ukrainian President Volodymyr Zelenskyy is stepping up the country’s pleas to pressure companies to exit Russia,” reports News4 Jax. “In an address to Congress Wednesday, he asked lawmakers to press U.S. businesses still operating in Russia to leave, saying the Russian market is ‘flooded with our blood.'”

“Make sure that the Russians do not receive a single penny that they use to destroy our people in Ukraine,” Zelenskyy said.

RBI can not immediately suspend operation at its Russia sites as McDonald’s did earlier this month due to the joint venture contract.

“We contacted the main operator of the business and demanded the suspension of Burger King restaurant operations in Russia,” Shear wrote in the March 17 letter. “He has refused to do so.”

Shear claimed the regards to the contract consist of “commitments to long-term investments” that do not enable for RBI to “unilaterally change the contract” or “simply walk and or overturn the entire agreement.”

The executive likewise claimed the company would need support from Russian authorities to enforce termination of the agreement which “will not practically happen anytime soon.”

“Would we like to suspend all Burger King operations immediately in Russia? Yes,” Shear wrote. “Are we able to enforce a suspension of operations today? No.”

Marks & Spencers and hotel group Accor and Marriot are encountering similar challenging regarding franchise agreements and are avoided from swiftly severing connections with Russia, per The Guardian.

RBI has strategized to reroute all profit from Russian Burger King locations to United Nations’ refugee firm (UNHCR) as a conciliatory measure. The firm has already contributed $1 million to the firm as well as dispersed $2 million well worth of complimentary Burger King meal coupons to NGOs that are dealing with Ukrainian refugees.

H/T Timcast

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