Promotions at Burger King Russia

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Promotions at Burger King Russia

The following is an open letter dated March 17, 2022 from RBI International President David Scheer to RBI staff.

I know that many of you are following the horrific attacks on Ukraine. There have been a lot of media reports that brands continue to work in Russia and domestically, we are working around the clock to do everything right. I want to share this letter to keep everyone informed of our activities.

We entered the Russian market ten years ago through a joint venture similar to our approach in more than 15 other global markets. We have three joint venture partners in Russia controlled by Alexander Kolobov, who has extensive experience in the restaurant business and is responsible for the day-to-day operations and oversight of ~800 restaurants in Russia; Investment Capital Ukraine is one of the largest investment companies in Ukraine; and VTB Capital. VTB Capital, as a subsidiary of one of the largest Russian banks, cooperates with a number of other Western companies in Russia, including other major QSR brands. We own a minority stake (15%) in the joint venture and none of the partners has a controlling stake.

Here are the actions we have taken to date:

  • We have begun the process of selling our stake in the business. While we would like to do this immediately, it is clear that this will take some time, given the terms of our existing joint venture agreement.

  • We contacted the main business operator and demanded to suspend the operation of the Burger King restaurant in Russia. He refused to do so.

  • We have suspended all corporate support for the Russian market, including operations, marketing and supply chain support, and withheld approval of new investments and expansions.

  • We have made a commitment to redirect any profits we make from the business, including our share of ownership, to the United Nations Refugee Agency (UNHCR) and have immediately made a donation of US$1 million to fulfill this commitment. We also worked with franchisees in over 25 countries to distribute $2 million worth of free Burger King meal coupons to NGOs supporting Ukrainian refugees.

    • Economic sanctions that have been imposed by many countries include VTB Bank and its controlled affiliates, including VTB Capital, and I want you to know that we are in full compliance with all applicable sanctions.

    We were asked why we cannot unilaterally suspend work. I want to answer this question directly.

    When master franchise agreements and joint ventures are formed, there are extensive long-term investment obligations and responsibilities for developing the business together. There are no legal provisions that would allow us to unilaterally change the contract or allow any of the partners to simply withdraw or cancel the entire agreement. No serious investor in any industry in the world would settle for a long-term business relationship with frivolous termination clauses. That’s why we say it’s a complicated legal process when we’re asked why we can’t just unilaterally close the business.

    Any ongoing attempt to enforce our contract will eventually require the support of the Russian authorities on the ground, and we know this is unlikely to happen anytime soon. For the same reason, you can see that other brands in Russia with a similar structure continue to operate in the market.

    Do we want to immediately suspend all Burger King operations in Russia? Yes. Can we forcibly suspend work today? No. But we want to be transparent in our actions and explain the steps we have taken to support the international business community in response to Russia’s attack on Ukraine and its people.

    David Shire
    President, International
    Restaurant Brands International