Over 800 Burger King Stores Refusing To Shut Down
Burger King is grappling with over 800 locations as they refuse to cease their overseas operations.
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Much to the world’s despair the Russian invasion of neighboring Ukraine continues. And with it comes more calls for businesses and organizations that have ties to the Kremlin to halt operations in the country. From fast-food restaurants to popular car manufacturers, several iconic brands have exited the region in the last three weeks. But unlike its counterparts, Burger King is still not one of them.
For about a week, Burger King has been struggling under the pressure to shut down eateries in the Eastern European country. And although the popular chain said it can’t legally suspend operations in the market right away, the company is moving to divest its 15% stake in its Russian business, CNBC reports. Complicating things further is businessman Alexander Kolobov’s refusal to close the 800 restaurants in the country.
The Russian national currently has a joint venture partnership with the fast-food giant. The deal stipulates that while Burger King’s parent company Restaurant Brands International (RBI) controls 15% of its restaurants in the region, Kolobov is responsible for the day-to-day operations and oversight. That means the burger chain can’t close up shop without his consent.
Addressing the troubling circumstances in an open letter, President of RBI’s international operations David Shear said Burger King has begun the process of disposing of their ownership stake in the business. While they would like to make it happen immediately, it will take some time to work out all the kinks due to the terms of their existing joint venture agreement. The eatery opened its first restaurant in Russia about a decade ago, with Kolobov on board as a partner.
In the letter, Shear also detailed how the complicated legal process involved in that deal is preventing Burger King from shutting down the partnership and businesses. “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,” he explained. “No serious investor in any industry in the world would agree to a long-term business relationship with flimsy termination clauses,” he added via CNN Business.
On the surface, it may seem like a lost cause. But Burger King is making progress in its efforts to leave Russia. Just last week the company removed corporate support from its businesses in the region. The move included suspending operations, marketing, and supply chain assistance. Interestingly, the legal struggles facing the burger giant are not unique. Several companies and banks are facing similar issues as they try to leave Russian soil. But their attempts are complicated by joint partnerships that they don’t have complete control over.
While Burger King’s efforts to shut down Russian operations have been thwarted, the chain has donated $3 million to support Ukrainian refugees. The company is also handing out free Whopper meal vouchers to people fleeing their home country. Additionally, Restaurant Brands International is redirecting its profits from their 800 franchised restaurants in the region to humanitarian efforts, the BBC reported earlier this month.
