Refusal from franchisees: Burger King cannot close branches in Russia

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Burger King restaurant in Moscow: Allegedly no possibility to change the contract with the franchisee

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IMAGO/Sergey Pyatakov / IMAGO/SNA

The parent company of the Burger King group says it cannot close the brand's fast food restaurants in Russia.

The independent operator refuses to take this step, said the head of Restaurant Brands International, David Shear, on the company's website.

The company needs help from the Russian government to enforce its contracts with franchisee Alexander Kolobov, but "we know that's not going to happen anytime soon."

Since they only have a 15 percent stake in the Burger King restaurants in Russia, they approached Kolobov with a request to stop the restaurant business.

“He refused to do this.” Shear continued, “Do we want to end all Burger King activities in Russia immediately?

Yes.

Can we enforce a cessation of operations today?

No."

According to the Reuters news agency, Kobolov could not be reached for comment.

The case highlights a potential weakness in the international franchising system that most American restaurant brands use to expand overseas: relationships with their independent operators.

According to Reuters, Starbucks also had an independent operator for its branches in Russia.

But unlike the Burger King case, the Kuwait-based Alshaya Group immediately agreed to close its Russian locations.

Restaurant Brands is currently trying to sell its interest in the joint venture.

It wants to do so immediately, Shear wrote, but it will take "some time" based on the terms of the agreement.

There are "no legal clauses that would allow us to unilaterally vary the contract, or allow either partner to walk away, or nullify the entire agreement," Shear wrote.

McDonald's closures explained a long time ago

Burger King competitor McDonald's announced a week ago that its approximately 850 branches in Russia would be closed until further notice.

"We cannot ignore the needless human suffering that is taking place in Ukraine," the company said.

It was therefore decided to temporarily close all branches in Russia and to discontinue business in Russia.

The 62,000 employees in the country should continue to be paid.

Sol/Reuters