Many Western brands have shunned Russia as a result of the invasion of Ukraine, but some have remained open in the nation and claim they are unable to close them.
Marks and Spencer, Burger King, and hotel companies Marriott and Accor are all unable to exit due to complex franchise agreements.
The companies have outsourced their Russian activities to third parties, and they do not own the enterprises that bear their names.
In Russia, the companies’ combined outlets number about a thousand.
M & S has 48 stores open and Burger King has 800 restaurants open, while Marriott and Accor both have 28 and 57 hotels open.
According to a report, the companies are bound by legal franchise agreements, making it difficult for them to remove their names from Russia’s shopping malls and high streets.
For decades, many Western companies have had such partnerships. Marks & Spencer outlets, for example, have been run by FiBA, a Turkish business that has held the rightto sell the retailer’s products across Eastern Europe since 1999. In response to the war, the retail behemoth has announced that it has halted supplies to FiBA.
Restaurant Brands International, which owns Burger King, said that its stores are operated by franchisees. It stated that “long-standing legal agreements are not easily altered in the near future.”
According to reports, hotel chains Marriott, IHG, and Accor, which owns the Ibis and Novotel brands, are all operating in Russia under identical agreements.
Franchising is a business method of selling products or services. It entails a franchisor, who has established the brand’s name, and a franchisee, who pays a fee for the right to do business and sell the franchisor’s products under the franchisor’s name.
While many brands remain trapped in Russia, Yum Brands, the parent company of KFC and Pizza Hut, announced that it was finalising an arrangement with its principal franchisee to temporarily cease Pizza Hut operations.
Ms. Hobbs, a lawyer at the law firm Bird & Bird, believes that businesses are “extremely concerned” about potential reputational harm from continuing to operate in Russia.