For at least a decade, Burger King’s European expansion formula has relied on a partnership of joint ventures, including a master franchisee, to open and operate new locations.
However, now the fast food chain has a big problem in Russia. It has been unable to exit its association or close its nearly 800 franchised outlets following the Russian invasion of Ukraine in February.
Burger King suspended corporate support for its stores in Russia in March. Parent company Restaurant Brands International Inc (RBI), which was formed in 2014 when Burger King merged with Tim Hortons, said on March 17 that it was seeking to sell its stake in the joint venture.
However, current Western sanctions against Russia severely limit the pool of potential buyers, a source familiar with the matter said.
Reuters was unable to determine the status of the negotiations.
Part of the problem, lawyers said this week, is the complexity of its joint-venture-style master franchise agreement, which allows Burger King to profit from sales of Whopper burgers without the risk of using its own capital.
A franchisor “cannot physically or legally prevent a franchisee from operating if they wish” in the current situation, said Lee Plave, a franchise attorney with Plave Koch PLC in Virginia. “The legal remedies that are available take time, and even when you pursue them, you would still end up in a Russian court to enforce an order, which is an unlikely prospect at this point.”
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.