The owner and operator of Burger King in Russia is refusing to shut down its 800 stores in the country despite a demand from Restaurant Brands International (RBI) for the outlets to cease operations following the outbreak of the invasion of Ukraine.
Canada-based RBI, joining with a host of other multinational corporations, ordered the suspension of its Russian businesses in solidarity with Ukraine, including all supply chain, operational and marketing support.
However, unlike other businesses, RBI does not have direct control of Burger King’s operations in the country due to a legal contract with local franchisee partner Alexander Kolobov, who has jointly run the company in Russia for a decade.
“We contacted the main operator of the business and demanded the suspension of Burger King restaurant operations in Russia,” said RBI president David Shear said in a statement. “He has refused to do so. Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today? No.”
Despite RBI’s efforts to publicly distance itself from the Russian operation, leaked documents released by the International Consortium of Investigative Journalists (ICIJ) found that the fast-food giant continues to maintain a quiet stake in the operation through an offshore joint venture.
Burger King’s parent company, Toronto-based Restaurant Brands International Inc., acknowledged the stake after the International Consortium of Investigative Journalists sent questions about its Russian holdings. It then announced it is trying to sell the shares but said it can’t be done quickly.
The company owns its stake through a Cyprus-registered joint venture that includes VTB Bank, a sanctioned, state-owned Russian bank, and a Ukrainian investment firm that Kyiv prosecutors once accused of helping Ukraine’s extravagantly corrupt former leader.
Another shareholder was a Cypriot company belonging to Alexander Kolobov, a Russian restaurant mogul who runs Burger King’s operations in the country.
After ICIJ sent questions about its Russian operations last week, Restaurant Brands International posted a statement on its website saying it wants to sell its stake in the business.
Complicated franchise deals have prevented other Western businesses, including Marks & Spencer, and hotel groups Marriott and Accor, from withdrawing from Russia. The Guardian reports that RBI is currently attempting to sell its 15% stake in the Russian Burger King operation to pull out of the country.
“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,” said Shear. “No serious investor in any industry in the world would agree to a long-term business relationship with flimsy termination clauses. This is exactly why we say it’s a complicated legal process.”
“We know that will not practically happen any time soon,” he said, noting that any efforts to force termination would require the support of Russian authorities. “This is also why you may see other brands in Russia with similar structures continue to operate in the market.”