Burger King is trying to suspend its operations in Russia, but that proves difficult. A business partner that controls 800 restaurants “refused” to close them, the company said.
The hamburger chain, owned by Restaurant Brands International, has a partnership with joint venture with businessman Alexander Kolobov in Russia.
RBI controls just 15% of its Russian Burger King business, and Kolobov is responsible for the “day-to-day operations and supervision” of its Russian locations. That means Burger King can’t just snap its fingers and close the store.
“We have initiated the process to divest our equity interest in the business,” said David Shear, president of RBI’s international operations, in an open letter.
“While we would like to do this immediately, it is clear that it will take some time to do so based on the terms of our existing joint venture agreement.”
McDonald’s, on the other hand, owns more than 80% of its restaurants in Russia. This significantly facilitated the exit from the country.
Shear said the RBI “demanded” the joint venture to immediately close Burger Kings, but Kolobov “refused to do so.”
Burger King entered Russia about a decade ago, operating the joint venture with Kolobov, Investment Capital Ukraine and VTB Capital, a Russian bank that has been hit by sanctions.
Shear explained that a “complicated legal process” is preventing the partnership and deal from closing.
“There are no legal provisions that allow us to unilaterally change the contract or allow any of the partners to simply walk away or void the entire agreement,” Shear said. “No serious investor in any industry in the world would agree to a long-term business relationship with flimsy termination clauses.”
Last week, Burger King withdrew corporate support for its Russian business, including the suspension of operations, marketing and supply chain assistance.
This issue highlights the problems that some Western companies and banks face in leaving Russia, complicated by joint ventures or partnerships over which they do not have full control. For example, a Papa Johns franchisee in Russia refused to close about 200 locations, even after the pizzeria chain suspended corporate support for it.
Source: CNN Brasil
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