Burger King's plans to leave Russia will be difficult. The fast food chain has faced resistance from an independent operator who is the company's local partner in Russia.
In fact, the company is ready to release its 15% stake in Russian businesses as a result of the country's invasion of Ukraine. Previously, last week Burger King said it would close more than 800 stores in Russia.
The company's International President David Shear explained in an open letter to employees that the company's business structure in Russia hinders its ability to close restaurants in the market like some of its competitors.
“Do we want to immediately suspend all Burger King operations in Russia? Yes. Can we enforce the suspension of operations today? No," Shear said as quoted by CNBC, Friday (18/3).
Burger King entered Russia through a joint venture with businessman Alexander Kolobov, Ukraine's Investment Capital and VTB Capital, which was sanctioned by the US as an affiliate of a major Russian bank.
Shear said the company contacted Alexander Kolobov, who is in charge of operations and supervision in Russia, and demanded the suspension of Burger King's restaurant operations in Russia. But Kolobov refused.
Burger King owns a 15% stake in the joint venture, and neither partner has a majority stake. According to Shear, Burger King cannot immediately close its own business.
"There is no clause in the law that allows us to unilaterally modify the contract or allow one of the partners to simply leave or cancel the entire agreement," he wrote.
"No serious investor in any industry in the world would agree to a long-term business relationship with a weak termination clause," he continued.
Shear said the company had started the process of divesting its stake in the joint venture, but it would take time to dispose of it under the terms of the agreement. He also said that Burger King is in full compliance with all applicable sanctions.
But the Burger King contract will require support from Russian authorities, which is unlikely any time soon due to ongoing conflicts and tensions with the West.
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