Why Papa John's Locations In Russia Have Stayed Open

The last two weeks have seen an exodus of American businesses from Russia after President Vladimir Putin ordered the invasion of neighboring Ukraine.

After facing pressure, fast food giant McDonald's shuttered its nearly 850 stores, taking a significant financial hit in the process. Following the burger chain's announcement, other American food and companies began to pull back operations as well, including Starbucks, KFC and Pizza Hut parent company Yum Brands, Burger King, and Papa John's. However, the New York Times reports for some of these brands pulling out of Russia is not that simple.

According to the outlet, nearly all of the McDonald's stores in Russia are corporate-owned, so announcing a full closure was logistically rather easy. For brands like Yum, Subway, Burger King, and Papa John's the move is more complicated because the majority of their stores are franchises. Though, as Observer explains, they are not all operated independently — rather, most of the brands deal with a "master franchisee" who operates all the Russian stores and contracts with local franchisees.

While Starbucks' 130 Russian stores are all owned by one Kuwait-based franchisee who has suspended operations, per the Seattle Times, and Yum Brands is finalizing a deal with its master franchisee in Russia to shut down all local Pizza Hut operations (though no word on if that will apply for KFC locations in the country as well), the master franchisee of Papa John's restaurants in Russia refuses to take action.

A "Wynne" for Russia

Last week, Papa John's announced it would suspend its corporate operations within Russia, according to Fox Business, writing "Papa John's stands with much of the globe in condemning aggression and violence. We hope for a peaceful resolution to the crisis in Ukraine, which today is hurting millions of innocent people." The brand is no longer providing business or marketing support to the Russian locations; Papa John's also announced a partnership with World Central Kitchen to provide food and supplies for refugees fleeing the conflict.

However, Papa John's corporate does not own any of the brand's 190-plus Russian stores directly, instead they are operated by master franchisee Christopher Wynne, a Colorado native who lives part-time in Moscow (via New York Times).

According to the New York Times, Wynne, 45, said of his refusal to shut down operations, "The best thing I can do as an individual is show compassion for the people, my employees, franchisees, and customers without judging them because of the politicians in power."

While Wynne frames the decision as protecting his Russian employees and customers — of who he says "at the end of the day ... appreciate a good pizza" — it is worth noting that he naturally has a significant financial interest in remaining open. As the New York Times reports, Wynne's business, PJ Western, made $59 million in 2020. He hopes to expand further this year, opening 20 to 40 new Papa John's locations, though the businessman acknowledged the current situation may derail those plans.

Skirting sanctions

Although Papa John's corporate said it is cutting off support for the Russian stores, the impact that will have on operations is limited. Wynne's business interests have put him in the crosshairs of political backlash before, as American sanctions on Russia wreaked havoc on his supply chain in 2014 after Russia forcibly annexed Crimea from Ukraine. According to the New York Times, Wynne worked diligently to circumvent those issues by switching to mostly Russian-based suppliers, funding the construction of seven new dough production facilities in the country and contracting with Russian farmers to provide ingredients like tomatoes and mozzarella cheese. Currently, he boasts "the only thing we import is olives."

While Wynne plans to continue profiting from the Russian market, Papa John's corporate clarified that it will not be receiving royalties from the still-open stores, which last year accounted for about 1% of the brand's total revenue, according to Bloomberg.

The pizza chain is no stranger to controversy. In 2017, the brand's founder "Papa" John Schnatter resigned as the company's CEO after blaming bad sales on Black NFL players kneeling during the national anthem (via Washington Post). While Schnatter is no longer involved in the company's operations, he has spoken recently about the crisis in Ukraine, blaming President Joe Biden for the war in a conspiracy-laced speech at CPAC.

It is unclear if the brand will face renewed backlash for the decisions of its eponymous founder or Russian management.