As sanctions and boycotts of Russian businesses continue during the country’s invasion of Ukraine, fast food chain Burger King announced that it wants to close its 800 Russian restaurants, but that it is not allowed. A Russian business partner in control of Burger King in the country has refused to cease operation.

According to CNN, the burger chain is owned by Restaurant Brands International (RBI), which also holds Popeyes, Firehouse Subs, and Tim Hortons in Canada. Creating a joint venture with Russian businessman Alexander Kolobov to build 800 stores across the country over a decade ago, RBI only has true ownership over 15% of its stores in Russia. This gives Kolobov “day-to-day operations and oversight” over the other 680 locations.

In contrast, McDonald’s was able to shutter most of its stores in Russia amid boycotts because the fast-foot chain owns over 80% of its restaurants in Russia.

In an open letter to the press, President of RBI’s International Operations David Shear wrote: “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.”

He announced that Restaurant Brands International has started to “demand” the process of selling its ownership stake in the Russian outlets, but that Alexander Kolobov has “refused to do so.”

Burger King’s joint venture also has controlling interest with Investment Capital Ukraine and VTB Capital, a Russian bank that was unexplainably excluded from sanctions.

McDonald's was able to close stores in Russia since they have over 90% controlling interest in the country's locations
McDonald’s was able to close stores in Russia since it has over 90% controlling interest in the country’s locations. Photo Credit: Shutterstock

A similar event occurred this week when controlling interest in the Papa John’s fast-food franchise in Russia refused to shutter over 200 stores after the pizza chain pulled its support.

Christopher Wynne, an American from Colorado, owns the Russian Papa John’s International restaurants, and stated that he actually planned on opening another 20 to 40 more locations throughout Russia.

In McDonald’s successful case, the rate of ownership is actually incredibly rare for the fast-food business. Globally, 93% of McDonald’s locations are owned by franchisees, according to Business Insider.

Starbucks, unlike Burger King, also had a willing partner in Alshaya Group, Reuters reported. The Kuwait-based company agreed to shutter its Russian stores and help support the 2,000 employees now out of a job.

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

He described the contract negotiations as “complicated.” The fast food franchise was at a deadlock since it couldn’t just cancel outright without facing steep consequences for breaking such a massive contract.

According to CNN, Burger King already took the risky move of removing corporate support for its Russian chains last week, including marketing and supply chain assistance.

“‘I know that many of you have been following the horrifying attacks on Ukraine,” David Shear stated. “There have been a lot of media reports about brands continuing to operate in Russia and internally, we have been working around the clock to do all the right things.”

“We can’t just unilaterally shut down the business” without approval from Russian authorities, he explained. “But we want to be transparent with our actions and explain the steps we have taken to stand with the international business community in response to Russia’s attack on Ukraine and its people.”

In the meantime, Restaurant Brands International and Burger King have donated $1 million to the United Nations’ Refugee Agency and an additional $2 million in free meal coupons for the Ukrainian refugees.