June 30, 2022

Burger King says the Russian company "refused" to close hundreds of restaurants

Burger King says the Russian company “refused” to close hundreds of restaurants

RBI International President David Scheer said in a Speech to staff Thursday that the company had contacted Kolobov to demand that all Russian Burger Kings operations be halted, and Kolobov refused. He said it has proven difficult to pull out of the complex web of trade deals the company set up there 10 years ago.

“Do we want to immediately suspend all operations of Burger King in Russia? Yes. Are we able to suspend operations today? No,” Cher wrote.

“But we want to be transparent in 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,” he said.

Burger King’s experience illustrates the difficulty many companies face when trying to extricate themselves from decades-old investments. Consumers who witnessed the horrific human toll of Russia’s attack on its neighbour, registered their disapproval of those companies remaining in Russia, and vowed to boycott them on social media.

Meanwhile, Russian President Vladimir Putin has vowed to nationalize companies trying to withdraw from the country. And many companies are stuck there because of complex legal agreements that put local control of individual stores in the hands of the Russians.

In his letter to staff, Scheer said his team is working around the clock to “do all the right things” in light of Russia’s attacks on Ukraine, which he described as “horrific.”

He said the Reserve Bank of India has halted all new investments there, and is redirecting any Russian profits to the United Nations refugee agency. RBI has also suspended all corporate support for the Russian market, which means Kolobov’s in-country team may have to reconsider its supply chain and marketing approach.

RBI is also trying to get rid of its ownership stake, but it is taking some time to do so due to the terms of the joint venture agreement. Cher wrote that there are no legal provisions allowing any of the partners to walk away and terminate the agreement.

“No serious investor in any industry in the world would agree to a long-term business relationship with flimsy termination clauses,” Scheer said.

He added that any attempt to do so would require the support of the Russian authorities on the ground. “We know that’s not going to happen practically any time soon,” he said. “This is also why you may see other brands in Russia with similar structures that continue to operate in the market.”