Burger King's parent company wants to close its hundreds of Russian locations, but it can't, according to a letter sent to employees on Thursday.
Is it possible to suspend all Burger King operations in Russia? Yes. Is it possible to enforce a suspension of operations today? Shear wrote, thanks to a complicated legal process.
The company previously announced plans to suspend corporate support for Russian locations, including stopping further financial investment, marketing, and supply chain.
It isn't easy to close the actual restaurants. Burger King uses franchise agreements instead of owning the majority of its restaurants. 15 years ago, Burger King entered Russia. The Russian business is owned by the Reserve Bank of India, so it cannot close all locations.
Attempting to enforce the contract and pull out completely would require cooperation from Russian authorities, which will not happen anytime soon, according to Shear.
McDonald's was the first major US fast-food chain to leave Russia on March 8. McDonald's was able to close all of its Russian locations because most of them were owned by the company. For most of the Russian locations, McDonald's didn't have to deal with the franchisees who wouldn't comply. The rate of ownership is high for McDonald's locations around the world.
Papa John's has had a similar problem with a franchisee who doesn't want to close. The New York Times reported that Christopher Wynne, an American from Colorado, is the owner of a company that operates 190 Papa John's locations in Russia. Despite the suspension of Russian business, he has no plans to close his restaurants. If the Russian government does not retaliate against American brands, he will open 20 to 40 more locations.
Burger King and Papa John's are examples of how franchise agreements can be used to take important decisions out of the company's hands.
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