Burger King says it wants to close its 800 restaurants in Russia but can’t

Burger King’s parent company, Restaurant Brands International, wants to close its hundreds of Russian locations, but it can’t, Chairman David Shear told employees in a letter Thursday.

“Do we want to suspend all Burger King operations in Russia immediately? Yes. Are we able to impose a suspension of operations today? No,” Shear wrote, citing “complicated legal proceedings.”

The company previously announced plans to suspend corporate support for Russian sites following the country’s attacks on Ukraine, including halting new financial, marketing and supply chain investment.

But shutting down real restaurants isn’t that simple. Like many fast food chains, Burger King does not own the majority of its restaurants on its own. Instead, it uses franchise agreements. When Burger King entered Russia 15 years ago, it partnered with Russian entities. Now RBI has a 15% stake in the Russian company, so it cannot unilaterally shut down all sites.

Shear said attempting to enforce the contract and pull out completely would require the cooperation of Russian authorities, which “is hardly going to happen any time soon.”

McDonald’s was the first major American fast-food chain to pull out of Russia on March 8, and other major chains soon followed suit. McDonald’s was in a better position to shut down all of its Russian sites because 84% were managed and owned by the company. This means that for the vast majority of Russian locations, McDonald’s has not had to deal with franchisees who may not be compliant. This ownership rate is exceptionally high globally, with 93% of McDonald’s locations owned by franchisees.

Papa John’s faced a similar problem from a franchisee who didn’t want to close. Christopher Wynne, an American from Colorado, owns a company that operates 190 Papa John’s locations in Russia, The New York Times reported. He had no plans to cease operations at his restaurants, although Papa John’s International suspended operations in Russia. He even planned to open 20 to 40 more outlets, if the Russian government did not take retaliatory measures against American brands.

Franchise agreements are the norm in fast food and can be profitable for businesses while protecting them from liability in many cases, but they can also take some important decisions away from them, as Burger King and Papa John’s are finding today. today in Russia.

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