Burger King’s Russian operator refuses to shut operations
It has three joint venture partners in Russia that are controlled by Alexander Kolobov
The owner of Burger King, Restaurant Brands International, has issued a statement clarifying why Burger King operations are unable to be suspended in Russia, as its operator in the country refuses to shut the group’s restaurants.
The group confirmed it had contacted the main operator of the business and “demanded” the suspension of Burger King restaurant operations in Russia, but noted he had “refused to do so”.
RBI has also started the process to dispose of its ownership stake in the business, but notes that “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”.
The group first entered the Russian market 10 years ago through a joint venture partnership. It has three joint venture partners in Russia including Alexander Kolobov, who is responsible for the day-to-day operations and oversight of around 800 restaurants in the country.
In a newly-released statement, David Shear, president of the group, said: “When master franchise agreements and joint ventures are formed, there are extensive commitments to long-term investments and accountabilities to grow the business together. 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.
“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.”
He added: “Any current attempt to enforce our contract would ultimately require the support of Russian authorities on the ground and we know that will not practically happen anytime soon. This is also why you may see other brands in Russia with similar structures continue to operate in the market.
“Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today? No. 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.”
The group has already 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.
It is also redirecting any profits it receives from the business, including its ownership stake, to the United Nations’ refugee agency (UNHCR) and made an immediate donation of $1m (£761k) toward that commitment. It is also in “full compliance” with all applicable sanctions on the country.
