The president of the company that owns Burger King on Thursday said a Russian franchise owner is refusing to close stores in Russia despite pressure to shut down operations.
David Shear, the president of Restaurant Brands International, wrote in a press release that the owner of the Russian Burger Kings has rebuffed calls to close, putting the company in a precarious spot because it has limited power to force him to do so.
Shear explained contracts between the corporate entity and franchisees involve “extensive commitments to long-term investments,” resulting in a “complicated legal process” to close any franchise-owned business.
“Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today? No,” Shear wrote in the release.
Restaurant Brands International entered the Russian market 10 years ago, and now has about 800 Burger Kings in the country controlled by a local businessman named Alexander Kolobov, according to the release. Restaurant Brands International has a 15 percent stake in the Russian venture.
Shear said he “demanded the suspension of Burger King restaurant operations in Russia” but Kolobov has refused.
Earlier this month, Restaurant Brands International joined other international companies, like McDonalds and Starbucks, after announcing it was cutting corporate support for the franchise operation in Russia over the invasion of Ukraine.
But Shear explained a stronger move, like shutting down operations, was always going to be more complicated.
“Any current attempt to enforce our contract would ultimately require the support of Russian authorities on the ground and we know that will not practically happen anytime soon,” Shear wrote. “This is also why you may see other brands in Russia with similar structures continue to operate in the market.”
Franchises are common for large, international companies operating across the globe. While corporate provides support for the franchises, they are often independently owned and run.
Restaurant Brands International is not the only company facing this dilemma. On Tuesday, it was reported that Papa Johns still has about 190 stores still open in Russia because the local franchise owner did not want to close business there.
Shear said he initiated the process to divest in the company’s stake in the Russian franchises and has cut off operations, marketing, and supply chain support for the Russian businesses.
Restaurant Brands International is also providing profits from the business to assist Ukrainian refugees.