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Burger King Refuses to Pull Out Stores from Russia

Burger King Refuses to Pull Out Stores from Russia
Source: Forbes

Despite calls to close the 800 Burger King locations in Russia, the company’s owner stated the operator “refused” to do so.

Following Russia’s invasion of Ukraine, Restaurant Brands stated it had asked its local partner, Alexander Kolobov, to close the stores.

However, it stated that “complex” relationships with international partners prevent it from “walking away” from these agreements.

Many Western companies have shut down or discontinued operations in Russia.

However, a limited number of companies, notably Burger King and UK retailer Marks and Spencer (M&S), have been unable to do so due to “complicated” legal agreements involving franchise partners.

“We contacted the principal operator of the firm and sought the suspension of Burger King restaurant operations in Russia,” Restaurant Brands International president David Shear said in a letter to employees.

“He has steadfastly refused to do so.”

Mr Shear went on to say that any adjustments to the local Burger King would “ultimately require the cooperation of Russian authorities on the ground, which we know will not happen anytime soon.”

Burger King first arrived in Russia ten years ago. It trades there through a joint venture with Mr Kolobov, who is the business’s principal day-to-day operator, as well as VTB Capital of Russia and a Ukrainian investment firm.

VTB Capital is a subsidiary of VTB Bank, Russia’s second-largest bank, which has been sanctioned by the United States, the United Kingdom, and several European nations.

Restaurant Brands holds a minority 15 percent ownership in the Russian joint venture, which is currently being wound down, according to Mr Shear.

“While we would prefer to achieve this right away, the conditions of our existing joint venture agreement make it apparent that it will take some time,” he added.

Meanwhile, Restaurant Brands has ceased to assist Russia’s supply chain, operations, and marketing. It will also turn down fresh investment and growth proposals in Russia.

Following Russia’s invasion on Ukraine, Western corporations are still under pressure to leave the country. A delegation of four Ukrainian MPs told UK Prime Minister Boris Johnson on Thursday that M&S is still open in Russia.

“It is absolutely necessary to put Putin in isolation and to let him know that he will not be getting a handshake from the world, a handshake from business, and there will be no support for him since he has killed children in Ukraine,” MP Alona Shkrum stated.

Some Western firms have been unable to close their outlets in Russia due to complicated franchise agreements. However, they have openly condemned the nation for its invasion of Ukraine.

Marks & Spencer outlets are run by FiBA, a Turkish business that has had the exclusive right to sell the retailer’s items throughout Eastern Europe since 1999.

M&S has announced that supplies of its items to FiBA, which operates Marks’ 48 shops in Russia, have been halted.

Meanwhile, German automaker Audi has warned that the conflict in Ukraine will disrupt supply networks “significantly.”

“We will see huge interference with all supply chains, not just the chip sector, but all foreign supply chains,” said Hildegard Wortmann, an Audi executive.