Burger King is looking to suspend its operations in Russia, but it’s proving difficult. A business partner that controls 800 restaurants has “refused” to close them, the company said.
The burger chain, owned by Restaurant Brands International, has a joint venture with businessman Alexander Kolobov in Russia. RBI controls just 15% of its Burger King business in Russia, with Kolobov responsible for the “daily operations and oversight” of its locations in the country.
That means Burger King can’t snap its fingers and go out of business.
“We have started the process to get rid of [de] our share of the business,” said David Shear, president of RBI’s international operations, in an open letter. “Although we would like to do so immediately, it is clear that it will take some time to do so based on the terms of our joint venture agreement. existing”.
McDonald’s, on the other hand, owns more than 80% of its restaurants in Russia. This made it easier to leave the country.
Shear said RBI has “demanded” that the joint venture immediately close Burger Kings, but Kolobov “has refused to do so.”
Burger King entered Russia a decade ago, operating the joint venture with Kolobov, Investment Capital Ukraine and VTB Capital, a Russian bank that has been the target of sanctions.
Shear explained that a “complicated legal process” prevents him from closing the company and the businesses.
“There are no legal clauses that allow us to unilaterally change the contract or allow either partner to simply walk out or nullify the entire agreement,” Shear said. “No serious investor in any industry in the world would accept a long-term business relationship with flimsy termination clauses.”
Burger King last week withdrew corporate support for its business in Russia, including suspending operations, marketing and supply chain assistance.
This affair highlights the problems some Western companies and banks face in withdrawing from Russia, complicated by joint ventures or partnerships over which they do not have full control. For example, a Papa Johns (PZZA) franchisee in Russia refused to close some 200 locations, even after the pizza chain suspended its corporate support.