Fast-food chains find breaking up with Russia is hard to do

Fast-food chains find breaking up with Russia is hard to do

Some fast-food chains are struggling to disentangle their brands from Russia amid intense public pressure on U.S. companies to withdraw from the country over its attack on Ukraine.

Canada’s Restaurant Brands International (RBI), the owner of Burger King, has said it wants to close the 800 restaurants it operates in Russia. But the company’s local partner, Russian businessman Alexander Kolobov, has refused to comply, while exiting business agreements set up 10 years ago is legally complicated, RBI said.

“Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today? No. But we want to be transparent with our actions and explain the steps we have taken to stand with the international business community in response to Russia’s attack on Ukraine and its people,” David Shear, international president of RBI, said this week in a news release. 

RBI owns 15% of Russia’s Burger King venture, with the remainder controlled by investors led by Kolobov. RBI has suspended corporate support for the Russian market, including operations, marketing and supply chain backing, and has started the process of exiting its Russian partnerships. The company has also suspended new investments in Russia and is rerouting any Russian profits to the United Nations’ refugee agency, according to the company.

Burger King restaurant seen at Saint-Petersburg shopping
Burger King restaurant in Saint Petersburg, Russia, shopping center on March 12, 2022.

Maksim Konstantinov/SOPA Images/LightRocket via Getty Images

Papa John’s has also suspended its corporate operations in Russia, yet nearly 200 of its restaurants there continue to sell pizza, according to the New York Times. All of the outlets are majority-owned by Russian citizens through a franchise agreement controlled by Christopher Wynne, an American who has a home in Moscow. 

“The vast majority of Russian people are very clearheaded and understand the dark gravity of the situation they’re in,” Wynne told the newspaper. “And, at the end of the day, they appreciate a good pizza.” 

Dunkin Donuts has 21 franchised-owned and operated stores in Russia, where the Canton, Massachusetts-based brand returned in 2010 after an 11-year absence. The company recently told Yahoo Finance that it had halted all “current development and investment” in Russia, but noted it can’t legally close independently operated franchises.

The stance has Dunkin Donuts listed among 84 companies that are scaling back in Russia, according to a running list by Yale University management professor Jeffrey Sonnenfeld. Describing such moves largely as window dressing, the companies “postponed unspecified future investments or suspended advertising while continuing substantive business operations,” Sonnenfeld said in a co-authored commentary published by Fortune.

Also taking a more hands-off approach is fast-food giant Subway, which is among 27 companies described by Sonnenfeld as digging in and defying demands to exit Russia, spurring boycott calls on social media.

The sandwich maker said it would redirect any profits from its Russian operations to humanitarian efforts, but that the roughly 450 Subway outlets in that country are independently owned and controlled by local franchisees. 

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“We don’t directly control these independent franchisees and their restaurants, and have limited insight into their day-to-day operations,” Subway said Wednesday in a statement

McDonald’s is having an easier time exiting Russia. The Golden Arches last week moved to temporarily close its 850 restaurants in the country. The Chicago -based company owns 84% of McDonald’s restaurants in Russia, making it easier to close their doors. 

Starbucks also has frozen business activity in Russia and halted shipment of its products. The coffee chain said its licensed partner agreed to pause operations at 130 Starbucks stores in Russia and continue to pay nearly 2,000 workers. 

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Author: Shirley