Foreign brands stuck in Russia due to complex franchise agreements

Several western brands have been unable to suspend operations in Russia despite wanting to do so because of the complex franchise deals with their Russian partners. The brands that have not been able to pull out from Russia include firms like Marks and Spencer, Burger King, and hotel groups Marriott and Accor.

Marks and Spencer still have 48 outlets open in Russia, Burger King 800, while Marriott and Accor have 28 and 57 hotels open, respectively.

According to a BBC report, these brands are locked into legal franchise agreements and have outsourced the Russian businesses to third parties which have made it difficult for them to pull out of Russia. A franchiser basically allows a company to do business in its name for a fee.

"These long-standing legal agreements are not easily changeable in the foreseeable future," per a statement from Burger King's owner Restaurant Brands International.

Marriott representatives told the publication that it would "continue to evaluate the ability for these hotels to remain open."

"You would as a member of the public... think why don't they just close their stores? But just from a pure business and contractual perspective, it's very difficult to do so without some far-reaching legal consequences," said Graeme Payne, a specialist in the UK and international franchising.

Breaking a franchise agreement can land these brands into legal troubles and can have financial implications as well. These agreements are generally 10 or more years long.

Meanwhile, these firms have taken several steps to show their support for Ukraine. Accor has suspended all future hotel openings and bookings for sanctioned individuals.

Burger King has diverted profit earned from Russian operations to humanitarian efforts. M&S has pledged more than £1.5m to support Ukrainian refugees.

On the other hand, some multinational brands have managed to pull out of Russia, including McDonald's, KFC, Starbucks, and Coca-Cola.

Yum! Brands, which owns KFC and Pizza Hut restaurants, said in a statement: "Like so many across the world, we are shocked and saddened by the tragic events unfolding in Ukraine. Yum! Brands have suspended all investment and restaurant development in Russia while we continue to assess additional options."

The other companies that have stopped offering their services in Russia include Netflix, Amazon Prime, H&M, Sephora, Zara, Tommy Hilfiger, Swatch, Mango, Puma, and Ikea.