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Franchises limit the possibility for brands to disassociate themselves from Russia.
Companies support the unprotected and those affected by the armed conflict.
They analyze agreements to make an image in rejection of the Russia-Ukraine war.
The invasion of Ukraine caused an exodus never seen before in history, as hundreds of companies decided to close operations in Russia in protest against the war, but there are others that, even if they wanted to join, they will not do so by agreements that bind them to maintain a presence in the country.
Among the Western brands that still maintain points of sale in the country led by Vladimir Putin are Marks & Spencer, Burger King and Marriott and AccorWho are subject to complex franchise agreements and they cannot shut down or unprotect their operational people. In fact, together, the firms are estimated to have about a thousand outlets across Russia.
M&S, for example, has 48 stores; Burger King keeps 800 restaurants open; and Marriott and Accor continue to operate 28 and 57 hotels, respectively.
Why can’t companies leave Russia?
According to talks between businessmen and the BBC, at least Marks & Spencer, Burger King and Marriott and Accor they are subject to legal franchise agreements, a business model in which they subcontract their businesses to third parties and do not own the operations that bear their name.
This means that the process to remove their brands or business relationship from the main streets and shopping centers of Russia could take more time and money than they might expect.
And it is that for decades this business model has been maintained among Western companies, as is the case with Marks & Spencer, stores that are operated by a Turkish company called FiBA and that has the rights to sell its products in Eastern Europe since 1999.
However, the retailer has suspended shipments of items to FiBA in response to the war and is considering its legal repercussions.
Meanwhile, the owner of Burger King, Restaurant Brands International, told the international media that its franchises have agreements subject to law that make it difficult for them to stop brand operationsThey are “Long-standing legal agreements cannot be easily changed in the near future.”
The hotel groups Marriott, IHG and the French chain Accor operate with similar plans in Russia, although they also assured that they would analyze their legal situation in the short and medium term.
One of the companies that seems to be able to break the franchise system and leave Russia is Yum Brands, owner of KFC and Pizza Hut, as it is already finalizing its agreements with the main franchisee to stop operations temporarily.
Yes they support Ukraine
Despite their legal limitations, the firms seek to join forces to help Ukraine after the Russian invasion that has unleashed an armed war and the migration of millions of people.
- Accor has suspended all future hotel and service openings in Russia, where it employs 3,500 people.
- Burger King sends profits from franchised operations in Russia to humanitarian actions for Ukraine.
- Marriott and IHG, with 28 hotels and resorts in the country, stopped developments and investments in progress in Russia and permanently closed their corporate offices in Moscow.
- M&S has pledged close to $2 million to support the refugees and has donated 20,000 coats and thermal clothing to them.
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