Burger King reveals it cannot close Russian operations as franchisee refused

Burger King already withdrew corporate support to its franchised stores in Russia. However, the company's parent company, Restaurant Brands International, said on Thursday, March 17, that it was not able to close 800 stores there.

According to Reuters, RBI shared that it cannot shut down the operating Burger King outlets in Russia as its local independent operator refused to do so. The restaurant company said it has reached out to BK's Russian main operator of business and demanded it to suspend its stores' operations, but he does not want to comply with the request.

RBI entered the Russian market 10 years ago through a joint venture deal with three parties, and they are Alexander Kolobov, who manages everyday operations; Investment Capital Ukraine, a private equity and asset management company; and VTB Capital, a state-owned bank which has been recently hit by sanctions over the Ukraine invasion.

The company said that to be able to impose its contracts with the franchisee, Alexander Kolobov, it needs assistance from the Russian government. But RBI knows that the needed help will not happen anytime soon due to the situation. Thus, although it pulled out support to franchisees, it does not have control over their decision to continue operating 800 locations of Burger King in Russia.

Then again, the fast-food chain is still doing what it can to "do all the right things" in its business in the Vladimir Putin-led nation. One of the things it is working on right now is selling its interest in its JV deal with the said three local entities. Burger King owns 15% of the joint venture, and this is being put up for sale.

"I know that many of you have been following the horrifying attacks on Ukraine and there have been a lot of media reports about brands continuing to operate in Russia and internally, we have been working around the clock to do all the right things," David Shear, RBI's International president, wrote in an open letter to employees dated March 17.

He added, "We started the process to dispose of our ownership stake in the business. While we would like to do this immediately, it is clear that it will take some time to do so based on the terms of our existing joint venture agreement."

Finally, the RBI's president's letter also mentioned the complications being faced by American companies as they attempt to stop operations in Russia. Shears explained the reason why they just cannot one-sidedly shut the business. He said that no company in a joint venture can do this immediately because "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."