26/06/2022

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Why Some American Fast Food Chains Aren’t Closing in Russia

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Photo: Stephen Zenner/SOPA Images (Getty Images)

There are many, many American fast food chains that operate in Russia, several of which have closed their doors because of Russia’s unrelenting and unprovoked attacks on Ukraine. But a few chains are continuing to operate in the Russian market, and the reason has to do with the convoluted way that certain franchise agreements work with independent operators. When you’re one of the biggest restaurant chains in the world, shutting your doors isn’t always a straightforward process.

The franchise model, upon which the modern fast food landscape is built, allows corporate headquarters to be mostly hands-off from everyday operations. This model has its benefits, but in this case, it’s not a nimble model; in the extremely rare instance that a business is trying to rapidly exit a market, especially temporarily, franchising can make it virtually impossible.

Burger King is still operating in Russia

Burger King is one such company that’s allegedly attempting to suspend its operations, but CNN reports that this is easier said than done. Burger King’s parent company, Restaurant Brands International (RBI), has a partnership in place with Russian businessman Alexander Kolobov. Because of that, RBI only directly controls 15% of its interests in Russia, and Kolobov is the one responsible for “day-to-day operations and oversight.” That includes deciding whether to close up shop.

“We started the process to dispose [of] our ownership stake in the business,” an open letter from RBI states. “While we would like to do this immediately, it is clear that it will take some time to do so based on the terms of our existing joint venture agreement.”

That doesn’t necessarily mean the chain isn’t trying. Last week it stopped its marketing and supply chain assistance, along with limited operational suspensions. But when 85% of the business is in someone else’s hands, it could be hard to make the rest of this happen if at all.

Papa Johns is still open, too

Papa Johns is facing a similar issue to Burger King, in that one of its franchise operators refuses to shutter locations in Russia. However, this particular operator, Christopher Wynne, is an American from Colorado. NBC reports that Wynne won’t close the doors of 190 storefronts in Russia, despite the fact that Papa Johns corporate is doing so. Wynne told the New York Times:

The best thing I can do as an individual is show compassion for the people, my employees, franchisees and customers without judging them because of the politicians in power. The vast majority of Russian people are very clearheaded and understand the dark gravity of the situation they’re in. And at the end of the day, they appreciate a good pizza.

Wynne has a considerable financial stake in the Russian market, so I’m guessing you can put two and two together as to his primary motivation to keep things running.

Subway is trying a different tactic

Like Burger King, Subway relies heavily on franchisees to run its business operations. Because of that, it can’t simply pull the plug on Russian shops, Tasting Table explains, since those locations are locally and independently owned. What Subway can do, and what it’s chosen to do, is redirect its Russian profits to causes supporting Ukrainian refugees, including meals and humanitarian efforts. But the shops in Russia will, for the foreseeable future, remain open.

McDonald’s has found a hybrid solution

Again, like the other chains on this list, the McDonald’s restaurants that remain open in Russia are ones whose franchisees have the power to make that decision. However, since McDonald’s owns over 80% of the McDonald’s restaurants in Russia, it was able to suspend the majority of its operations and exit the Russian market. The company stated that it will, however, continue paying the employees of those shuttered locations for the time being.

The closures have provided an opportunity for Russians to jump into the void left by McDonald’s. Insider reports that a chain called “Uncle Vanya” is trying to step in and trademark a brand logo that looks more than suspiciously similar to that of the Golden Arches, incorporated into the Cyrillic letter “Ve.”

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