The Real Reason Subway Won't Be Leaving Russia Anytime Soon
If you've been paying attention to the news, you've no doubt been hearing about the fast-changing situation in Ukraine, where Russian armed forces started invading and attacking in late February.
People around the world have been reacting with messages of support for the besieged country, as well as no small amount of criticism of Russia and its controversial president Vladimir Putin. Given the polarity of the situation, it's perhaps unsurprising that companies have taken a side as well, with more than a few pledging to withdraw financial support from Russia in a number of ways. Starbucks, Pepsi, and Coca-Cola, for example, have stopped selling the majority of their products in the country, while the recognizable vodka brand Stolichnaya officially changed its name to Stoli in an attempt to distance itself from its Russian origins. And now, the sandwich chain Subway has taken a stand on the war, as well — but the company won't be ceasing its operations in Russia, at least not for now.
Subway says it stands with Ukraine but explains that it's a franchise
When a business is independently owned, decisions about operations are relatively straightforward; but when it's a franchise, things can get more complex. A franchise is a type of business that is recognized for its name and its services — such as the behemoth McDonald's — which uses a system of franchisees at some or all of its locations. This means that the stores are managed locally, but are run under a specific set of rules and guidelines outlined by the parent company.
Subway, like many fast food chains, is a franchise, and for that reason, even though it's facing pressure to close its operations in Russia, it's not that simple for the chain to do so. As the company explained in a statement released last week, Subway stands with Ukraine but is unable (at this time) to pause business in Russia.
"Our thoughts are with the people of Ukraine, and we are committed to supporting those impacted by the tragic events in the region," the statement reads. "In addition to working with our franchisees across Europe to provide meals to refugees, we will redirect any profits from operations in Russia to humanitarian efforts supporting Ukrainians who have been affected by the war. Our restaurants in Russia are all independently owned and operated by local franchisees and managed by an independent master franchisee. We don't directly control these independent franchisees and their restaurants."
The challenges of international franchising
As explained by Nation's Restaurant News, it can be challenging for large companies to maintain control over franchise locations in other countries — and especially challenging for those companies to quickly and adeptly respond to complex international developments such as the situation in Ukraine. An example the article cites is the pizza chain Papa John's, which last week pledged to completely suspend all corporate operations in Russia. As the out explains, however, an American master franchisee operates 188 Papa John's locations in Russia, meaning that all of those locations are likely still open and that there's "very little the franchisor can do about it."
"When you're dealing with international franchise expansion, circumstances change," Alan Greenfield, a Chicago-based attorney specializing in international franchising, told Nation's Restaurant News. "It's more unpredictable than the domestic market. As there are regime changes and different policies and administrations, even in the U.S. government, a franchisor will have to be nimble."
The fast food giant McDonald's, for example, is well known for having many franchise locations around the world. And yet, the company recently announced it would be temporarily closing all its restaurants in Russia. How? As pointed out by Cheapism, all 850 of its Russian locations are corporate-owned, not franchised, giving the company more power to actually shut them down. As this is not the case with Subway's Russian locations, the sandwich chain will likely continue to operate in the country as usual.