Burger King is planning to sell its 15% stake in its business in Russia to completely separate itself from its restaurants there, but the hamburger chain said it cannot legally suspend operations in that country immediately.
The company Restaurant Brands International, owner of the Burger King chain, announced last week that it would suspend all corporate support for its more than 800 franchised branches in Russia in response to Russia’s continued attacks against Ukraine.
Such suspension includes the denial of approvals for new investment or expansion and the pause of operations, marketing and the entire operation of its supply chain.
The international president of Burger King, David Shear, said that the structure of his business in Russia does not allow him to close restaurants in Russia quickly and easily as some have already done s of its competitors.
“Would we like to suspend all Burger King operations immediately in Russia? Yes. Can we enforce a suspension of operations today? No,” Shear said.
Burger King entered Russia through a joint venture with businessman Alexander Kolobov, Investment Capital Ukraine and VTB Capital, which has been affected by US sanctions being a subsidiary of a major Russian bank.
Shear said the burger chain contacted Kolobov , who is responsible for the day-to-day operations and oversight of the Russian locations, and demanded that he suspend operations of the Burger King restaurant in Russia, something Kolobov refused, Shear said.
Burger King owns a 15% interest in the joint venture and neither partner has a controlling interest. According to Shear, Burger King cannot immediately go out of business on its own, simply because the contract does not allow it to do so.
“There are no legal clauses that allow us to unilaterally change the contract or allow anyone to of the partners simply withdraw or revoke the entire agreement. No serious investor in any industry in the world would accept a long-term business relationship with flimsy termination clauses,” Shear said, according to CNBC.
Shear said the company has begun the process of divesting its stake in the joint venture, but it will take some time to divest under the terms of the agreement. He also said that Burger King is in full compliance with all the sanctions that the United States applied to Russia.
Enforcing the Burger King contract would require the support of the Russian authorities, which is unlikely to happen soon due to the ongoing conflict and tensions with the West.
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