Burger King partner ‘refuses’ to close 800 Russian sites

The hamburger chain, owned by International restaurant brands (RSQ), has a joint venture partnership with businessman Alexander Kolobov in Russia. RBI controls just 15% of its Russian Burger King business, and Kolobov is responsible for the “day-to-day operations and oversight” of its sites in the country.

That means Burger King can’t just snap its fingers and shut up shop.

“We have started the process of eliminating [of] our stake in the business,” David Shear, president of international operations at RBI, said in an open letter. “Although we would like to do this immediately, it is clear that it will take some time to do so depending on the terms of our existing joint venture agreement. »
McDonald’s (MCD), on the other hand, owns more than 80% of its restaurants in Russia. It made getting out of the country much easier.

Shear said RBI “demanded” the joint venture shut down Burger Kings immediately, but Kolobov “refused to do so.”

Burger King entered Russia a decade ago, operating the joint venture with Kolobov, Investment Capital Ukraine and VTB Capital, a sanctioned Russian bank.

Shear explained that a “complicated legal process” prevents him from closing the partnership and businesses.

“There are no legal clauses that allow us to unilaterally modify the contract or allow one of the partners to simply withdraw or cancel the entire agreement,” Shear said. “No serious investor in any industry in the world would agree to a long-term business relationship with flimsy termination clauses.”

Last week, Burger King withdrew support for its businesses in Russia, including suspending operations, marketing and supply chain support.
This question highlights the problems some Western companies and banks face in exiting Russia, complicated by joint ventures or partnerships over which they do not have full control. For example, a dad johns (PZZA) franchisee in Russia refused to close around 200 locations even after the pizza chain suspended support for the business.


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