According to Burger King, the Russian franchisee has refused to close restaurants

FILE PHOTO: FILE PHOTO: Women walk in front of a Burger King restaurant in Moscow
FILE PHOTO: Women walk in front of a Burger King restaurant in Moscow, Russia September 15, 2015. REUTERS/Maxim Zmeyev/File Photo

March 17, 2022

By Hilary Russ

NEW YORK (Reuters) – Burger King’s parent company said on Thursday it had been unable to close its 800 restaurants in Russia because its independent operator there “declined”.

Restaurant Brands International Inc said it would need help from the Russian government to enforce its contracts with franchisee Alexander Kolobov, but “we know that’s not going to happen any time soon,” it said in a letter to employees by David Shear. President, international, of the company.

It was not immediately clear how to reach Kolobov for comment.

Shear’s lengthy letter highlights the many complications faced by some American fast-food brands as they attempt to shut down operations in Russia following Moscow’s invasion of Ukraine.

It also shows what can become a pain point in the international franchising that most American restaurant brands use to expand overseas: relationships with their independent operators.

On March 8, Starbucks Corp and a wave of other companies followed McDonald’s Corp by saying they would suspend or limit operations in Russia.

Like Burger King, Starbucks doesn’t own or operate its more than 100 coffee shops there.

But unlike Burger King, it had a willing partner — the Kuwait-based Alshaya Group — which immediately agreed to close Starbucks’ locations in Russia and support its 2,000 employees.

Restaurant Brands entered Russia a decade ago through a joint venture partnership with three companies: Kolobov, which controls day-to-day operations, private equity and wealth management firm Investment Capital Ukraine, and Russia’s state-owned VTB Bank, which has been hit by Western sanctions .

Restaurant Brands has initiated the process of divesting its 15% interest in the joint venture. It wants to do so immediately, Shear said, but it will take “some time” based on the terms of the agreement.

There are “no legal clauses allowing us to unilaterally vary the contract or allow either partner to just walk away or nullify the entire agreement,” Shear wrote.

“Do we want to stop all Burger King activities in Russia immediately? Yes. Can we enforce a suspension of operations today?” he wrote. “No.”

(Reporting by Hilary Russ in New York; Additional reporting by Praveen Paramasivam in Bengaluru; Editing by Devika Syamnath, Leslie Adler and Jonathan Oatis) According to Burger King, the Russian franchisee has refused to close restaurants


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