Why Burger King Hasn't Closed Any Of Its Russian Locations
While it is now virtually impossible to get a Big Mac in Russia, fans of Burger King's Whopper have not needed to go to the extreme lengths (and costs) some Russians have been willing to go to for one last bite of McDonald's. That's because, despite the company's efforts, Burger King has not shut down its Russian operations with its franchisees.
According to a letter sent to employees from Restaurant Brands International's (RBI) president of international business David Shear, the Burger King parent company only owns a 15% stake in its 800 Russian locations. The joint venture was launched in 2010 with investments from Russian businessman Alexander Kolobov, Investment Capital Ukraine, and VTB Capital — a Russian bank which has been impacted by sanctions since the invasion of Ukraine began, says CNN. The letter explains Kolobov is responsible for managing the "day-to-day operations" of the Russian burger business.
As other western chains began to pause business in Russia, RBI initiated efforts to remove Burger King as well. According to Shear, the company "demanded" Kolobov suspend Russian Burger King operations, but he "refused."
Kolobov told the BBC he is unable to unilaterally shut down the locations because he does not own a controlling stake in the Russian business — none of the investors do. "The decision to terminate and suspend operations of the franchisee which employs about 25,000 persons must be taken by all shareholders, considering [the] impact it may have on the employees and their families," Kolobov said.
Burger King has a complicated relationship with its Russian stores
Unlike McDonald's, which owns the majority of its Russian locations, other brands have struggled to suspend business because of contracts with local operators. Starbucks businesses are controlled by one operator who agreed to close locations, according to the Seattle Times; but Yum Brands (owners of KFC and Pizza Hut) report they are still negotiating the suspension of some franchise stores. Papa John's master franchisee Christopher Wynne, on the other hand, has refused to suspend operations, despite a cutoff of corporate support.
Burger King is in a complicated middle ground. As stated above, Kolobov only owns a 30% stake in the Russian venture, making it impossible for him or RBI to shutdown the operations (via BBC). Shear noted in the letter to employees that "there are no legal clauses that allow us to unilaterally change the contract or allow any one of the partners to simply walk away or overturn the entire agreement," and that any effort to enforce a closure "would ultimately require the support of Russian authorities on the ground."
In light of this, RBI has suspended all corporate marketing and supply chain support to its Russian restaurants and said it will veto any proposals for expansion in the region. Shear also reported that the company has begun the process of divesting its stake in the business, a process he acknowledged would take time. RBI has also pledged that any profits it makes from its 15% ownership in Russia will be donated to the United Nations' refugee agency, the UNHCR.