Burger King says Russia franchisee 'refused' to shutter restaurants

[groundloop]

Source: Reuters

Burger King's parent company said on Thursday it has not been able to close its 800 restaurants in Russia because its independent operator there "refused" to do so.

Restaurant Brands International Inc (QSR.TO) said that to enforce its contracts with the franchisee, Alexander Kolobov, it would need the help of the Russian government, but "we know that will not practically happen anytime soon," according to a letter to employees from David Shear, president, international, of the company.

It also exposes what can become a point of weakness in international franchising, which is how most American restaurant brands expand overseas: the relationships with their independent operators.

[snip]


Restaurant Brands has started the process to dispose of its 15% ownership stake in the joint venture. It wants to do so immediately, Shear said, but it will take "some time" based on the terms of the agreement.




Read more: https://www.reuters.com/business/retail-consumer/burger-king-says-russia-franchisee-refused-shutter-restaurants-2022-03-17/

[NullTuples]

1. BK is divesting themselves of their (selling off) involvement in the Russian franchises

BK has for the most part usually been good on social issues.

https://www.restaurantbusinessonline.com/financing/burger-king-selling-its-interest-its-russia-joint-venture

[targetpractice]

4. I'll bet all that US Burger King provides is...

... a license to the franchisee for the brand. They have no operational control.

Same for Subway, Dunkn' Donuts, and others

Seems like MacDonald's operated company stores, and could close them easily.

[LiberatedUSA]

2. Here is your Whopper.

Is potato.

[Mr.Bill]

3. I was wondering how they were going to force francises

to close under the current conditions. This is actually good for the franchisees, since they won't have to pay royalties to the franchisor.

[NullTuples]

5. With Subway, franchisees are obligated to buy everything from Subway Corporate

That would be one way?

[Mr.Bill]

7. Under the current conditions, they probably can't.

So now they can sell whatever they want. Someone could put up a tent selling hot dogs right now in Russia and call it Jack-in-the-Box if they wanted to.

[targetpractice]

6. Yes, and there is no practical way Burger King can sue...

... for unauthorized use of the brand. Putin is going to nationalize McDonald's, and he's advocated for software piracy.

[onetexan]

8. Do the US franchisees in other countries source their own meat & products locally? Or are the food

imported from a US distributor?

[former9thward]

13. They use local sources.

It would be extremely costly to ship food products and a country like Russia has plenty of domestic sources.

[yaesu]

9. I have a feeling that russia bk quality control is going to fall off the cliff. nt

[PSPS]

10. In US, BK says "have it your way." In russia, BK says "have it our way"

[JustABozoOnThisBus]

12. Have it with whatever is left of our supplies.

We expect more beef, lettuce, and tomato from Ukraine any day.

[Pachamama]

22. Bwahahaha....

That made me laugh hard....

[BumRushDaShow]

11. Usually these companies have designated wholesale distributors of their pre-packaged products

for franchises to buy for cooking on-site, thus providing a "standardized experience" worldwide (aside from exceptions for regional offerings in some locales, whether national or international). I would think BK does the same and once they run out of whatever stock they have, then they have to improvise.

I remember listening to a CBC public affairs program broadcast (on shortwave) years ago where they were describing how places like McDonald's handled their franchises, including a discussion of the various cost models for a franchise - whether the franchisee was buying an existing McDonald's restaurant, was converting space to be one, or was planning to actually build a new restaurant from the ground up (the most expensive option). They had mentioned how these outlets all got pre-packaged frozen products that were manufactured per some strict recipe specifications and with the same quality control process (regardless of the processing source), so that the resulting finished offering would provide the "expected" consistent taste from restaurant to restaurant, no matter where the food was purchased around the world.

[former9thward]

14. I have been to McDonald's in several countries.

Including St. Petersburg and Moscow in Russia and Jerusalem and Tel Aviv in Israel. They have similar but different products than the U.S. (especially in Israel where you can't even order dairy based products and meat in the same order). They use local sources for their meat, potatoes,dairy. I think just the packaging is shipped in.

[BumRushDaShow]

15. This is what I wrote

Usually these companies have designated wholesale distributors of their pre-packaged products

for franchises to buy for cooking on-site, thus providing a "standardized experience" worldwide (aside from exceptions for regional offerings in some locales, whether national or international).

I have been to different McDonald's around the world as well, and even nationally, where I have experienced "regional" variations based on certain local tastes. For example, there are McDonald's around Hawai'i where spam is a breakfast menu option (which I tried and I do buy spam every once in awhile) -



Similarly the spam (and other products like Japanese tamago-style eggs on the burgers) are offered in Asia - https://www.techeblog.com/strange-mcdonalds-items-from-around-the-world/



The point being that these types of companies have a "brand" and they want that "brand" to be consistent around the world (again taking into account regional tastes), otherwise you might as well call a McDonald's a "Wendy's" if they suddenly start selling square-shaped hamburgers.

[rpannier]

18. I've seen the Tamago in Japan

Never bought it because I always think of the Tomacco on the Simpsons when I do see the name

[BumRushDaShow]

21. LOL

I have considered making that since I have most of the ingredients but it looked like too much work with doing the layers.

[milestogo]

16. Let them eat musk ox.

[JTOL]

17. A force majeure clause

Most companies have this in their contracts. This means a company can end a contract for circumstances that could not be anticipated, prevented or controlled. I believe Restaurant Brands International, Inc. needs a better excuse than they (the franchisee) didn't want to.

[Haggis 4 Breakfast]

20. You were reading my mind there, JTOL.

That was my question, too.

[onenote]

23. How would invoking a force majeure clause help?

Here is a typical force majeure clause in an agreement between a franchisee and franchisor:

"If the performance of any obligation by any party under this Agreement
is prevented or delayed by reason of Force Majeure, which cannot be overcome by
use of normal commercial measures, the parties shall be relieved of their
respective obligations to the extent the parties are respectively necessarily
prevented or delayed in such performance during the period of such Force
Majeure. The party whose performance is affected by an event of Force Majeure
shall give prompt notice of such Force Majeure event to the other party,
setting forth the nature thereof and an estimate as to its duration, and shall
be liable for failure to give such timely notice only to the extent of damage
actually caused."

[tonekat]

19. I imagine the big brands with outposts in Russia

Would take the position of "As of now these locations are out of the BK quality control assurance, and what they serve out of the building has nothing to do with our brand".

Beetburgers?