Restaurant Brands International Can’t Suspend Russian Burger King, Works On Divesting Instead

Apparently, Burger King is not the ‘king’ of its Russian franchise. Restaurant Brands International Inc. (TSX: QSR) announced today that it plans to dispose of its stake in its Russian joint venture operating around 800 Burger King stores in the country.

“We started the process to dispose our ownership stake in the business,” said RBI President, International David Shear in a statement. “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.”

This follows the quick-service restaurant chain’s announcement last week that it would suspend operations in Russia in support of war-torn Ukraine.

But apparently, it can’t “unilaterally shut down the business” in Russia as it holds a mere 15% equity in the joint venture operating the chain in the country. Russian businessman Alexander Kolobov, who oversees the joint venture’s operations, is said to have refused the company’s demand to suspend Burger King’s operations in the country.

Another joint venture partner VTB Capital is affiliated with VTB Bank and is part of the latter’s economic sanctions imposed by the global community.

“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. No serious investor in any industry in the world would agree to a long-term business relationship with flimsy termination clauses,” Shear further said.

On top of divesting from the Russian venture, the restaurant giant also “suspended all corporate support for the Russian market.” It also committed to redirecting any profit from the Russian businesses, including its disposal of 15% equity, to the United Nations’ refugee agency on top of its prior US$1-million donation.

The firm said it has worked with other franchisees in 25 countries “to distribute US$2 million of free meal coupons for Burger King restaurants to NGOs supporting Ukrainian refugees.”

“Would we like to suspend all Burger King operations immediately in Russia? Yes. Are we able to enforce a suspension of operations today? No. 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,” Shear ended the statement.

In 2020, Burger King is the third biggest western-based QSR in Russia, a quick rise since the chain started operations in 2010. KFC and McDonald’s have previously announced a pause on their respective Russian operations.

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Restaurant Brands International last traded at $73.05 on the TSX.

Information for this briefing was found via Daily Mail and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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