Burger King plans to sell its 15% stake in Russia’s business but the burger chain stated that it cannot legally suspend its operations on the Russian market immediately.
In response to ongoing Kremlin attacks on Ukraine, the Restaurant Brands International restaurant chain announced last week that it would suspend all corporate support at its 800+ franchised locations in Russia. This includes denying approvals for further expansion or investment, and pausing operations and marketing.
However, David Shear , the International President of the company, stated in an open letter to employees that the Russian structure of the company hinders it from closing down restaurants in the market as some of its rivals.
“Would you like to immediately suspend all Burger King operations in Russia?” Yes. Can we enforce a suspension? Shear stated, “No.”
Burger King entered Russia via a joint venture with Alexander Kolobov (Investment Capital Ukraine) and VTB Capital (which has been affected by U.S. sanctions because it is an affiliate of a large Russian bank).
Shear stated that the burger chain reached out to Kolobov who is responsible for overseeing the Russian locations and “demanded the suspension” of Burger King’s Russian operations. Kolobov declined, Shear claims.
Burger King holds a 15% stake in the joint venture. None of the other partners have a majority. Shear says that Burger King cannot immediately close the business.
He wrote that there are no legal provisions that would allow us to unilaterally alter the contract, or allow any of the partners to walk away from the agreement. “No serious investor would accept a long-term relationship that has weak termination clauses.
Shear stated that the company has begun the process of selling its stake in the joint venture. However, it will take time to unravel based on the terms and conditions of the agreement. He stated that Burger King has been in compliance with all applicable sanctions.
To enforce Burger King’s contract, Russian authorities would need to be involved. This is unlikely due to the ongoing conflict with the West and tensions.
