Canada

McDonald’s silent on why some locations still open in Russia | CBC News

After publicly announcing three weeks ago it was suspending operations in Russia, McDonald’s has now gone silent about why some of its restaurants are still open for business in the country. 

This week, CBC News visited two Moscow McDonald’s serving up burgers and fries, and there are reports online that other Russian locations also remain operational. 

Despite multiple inquiries, McDonald’s hasn’t explained why these restaurants haven’t shut down. 

However, the U.S.-based fast food chain was open about its plans on March 8 when it announced that all 850 locations in Russia would close temporarily to protest the country’s invasion of Ukraine. 

“We join the world in condemning aggression and violence, and praying for peace,” said McDonald’s CEO Chris Kempczinski in a statement at the time.

McDonald’s joined several multinationals, including other fast food chains, suspending business in Russia following pressure on social media. But some of those chains, such as Burger King, Subway and KFC, continue to face scrutiny because, although they ceased corporate operations, their franchise-owned locations remain open for business.

On Friday, CBC News visited a McDonald’s at Moscow’s Domodedovo airport. An employee said it was still open because it’s a franchise operation. (Dmitry Kozlov/CBC)

In response to an email inquiry, McDonald’s told CBC News on March 10 that all its Russian locations would close, including franchise-owned restaurants.

But soon after McDonald’s shut its Russian locations on March 14, reports surfaced that some remained open.

Last week, Russian news outlet RIA Novosti stated that, according to a statement from McDonald’s, a number of its franchises in Moscow were still operational. 

On Thursday, CBC News visited a McDonald’s restaurant at Moscow’s Leningradsky railway station and found it packed with customers. Most seats were occupied in the dining area and there was a long line of customers waiting to pick up their orders. 

On Thursday, CBC News visited a McDonald’s restaurant at Moscow’s Leningradsky railway station and found it open and busy. (Dmitry Kozlov/CBC)

On Friday, CBC News visited another McDonald’s at Moscow’s Domodedovo airport. It, too, was open and serving scores of customers. 

An employee at each location said the restaurant remained open because it was a franchise operation. 

And Moscow isn’t the only city where Russians can still get a Big Mac.

Also on Thursday, Will Vernon, senior producer with BBC’s Moscow bureau, tweeted he discovered a McDonald’s serving customers in St. Petersburg.

“The staff told me that, as they are a franchise, they are still open, and will continue to operate,” he said. 

Over the past week, CBC News repeatedly reached out to McDonald’s for comment about the open locations and, on Thursday, sent photos. The company did not reply. 

According to information posted by McDonald’s online, there were 847 McDonald’s in Russia at the end of 2021 and 84 per cent of them were controlled by the company. That means 135 locations were independently operated.

The word is out

Business professor Ian Lee said he suspects the still-operational McDonald’s are independently run restaurants that have some type of franchise or joint venture agreement with the company, making it difficult for McDonald’s to arbitrarily shut them down. 

But Lee said the chain needs to explain publicly why some locations are still serving customers.

“When they claim that they shut them all down, and then they’re not all shut down, and then they go silent about why they’re not shut down, all they’re doing is hurting their brand,” said Lee, an associate professor at Carleton University in Ottawa. 

Already, people on social media are demanding answers after viewing videos and photos posted online of purportedly still-operational McDonald’s in Russia. 

“Everybody in the world that has a cellphone is potentially a spy,” said Lee.

“The company must get to the front of the story and be transparent, because sooner or later, the truth will come out.”

Other fast-food chains have spoken publicly about why their franchise operations are still open in Russia. 

Last week, Subway issued a statement that it was unable to shutter its 450 restaurants in the country because they are independently owned franchises, managed by an independent master franchisee.  

Subway also said it was redirecting all corporate profits earned in Russia to humanitarian efforts in Ukraine. 

WATCH | When the first McDonald’s in Russia opened in 1990:

McDonald’s opened its first Russian location in 1990

Russians flocked to the first-ever McDonald’s in the country, in Moscow’s Puskin Square. 3:23

Last week, Toronto-based Restaurant Brands International (RBI) also issued a statement explaining why its 800 Burger King restaurants, which are managed by a master franchisee, remain open in Russia. 

In a detailed letter posted online, RBI’s international president David Shear said that, as a result of a joint venture partnership, RBI only controls 15 per cent of Burger King’s operations in Russia.  

Shear said RBI had previously contacted Burger King’s “main operator” in the country to demand it suspend operations, but that “they have refused to do so.”

Consequently, RBI is now trying to dispose of its ownership stake in Russia’s Burger Kings, but “it will take some time to do so based on the terms of our existing joint-venture agreement,” said Shear. 

Meanwhile, RBI has suspended all corporate support in Russia and is redirecting profits to humanitarian efforts, he said. 

Supply issues could still force shut down

Franchise lawyer Daniel So said multinational companies often rely on a master franchisee to manage locations in foreign countries, and typically have little or no power to demand they shut down. 

“When these master franchise agreements get negotiated, the termination clauses are often very, very thin,” said Victoria-based So with McKenzie Lake Lawyers.

“[This] isn’t surprising given the amount of investment required by the master franchisee to operate in the territory.”

Franchise lawyer Daniel So says multinational companies often rely on a master franchisee to manage locations in foreign countries. (Submitted by Daniel So)

But So said franchise operations still open in Russia could soon end up shutting down, not because head office wants them to, but because they may run out of supplies. 

Along with hundreds of businesses pulling out of Russia, the country has been hit with sweeping international sanctions that are disrupting supply chains. So said some supplies franchisees rely on that come from outside Russia could soon dry up.

“[That] may force the closure of these restaurants where the franchisor could not require the closure.”

With files from Dmitry Kozlov




Source link

Related Articles

Back to top button