Just over a year after many Western businesses retreated from Russia in the wake of its invasion of Ukraine, a small number of American fast-food chains remain steadfast in their Russian operations. Among them, Subway and Carl’s Jr. are notable for their unbroken streak of advertising on Russian social media, seemingly undeterred by the geopolitical storm.
Despite the mass exodus of peers such as McDonald’s and Starbucks, Subway and Carl’s Jr. have opted for business as usual, maintaining a robust presence in Russia. This is due in part to the franchise business model, which allows the chains’ master franchisees in Russia to exercise significant independence in local operations.
Subway, now under the ownership of Roark Capital and holding around 446 franchises in Russia, has stated that because it has “no corporately owned restaurant operations in Russia,” the management of these franchises, including marketing and supply chain, falls to Subway Russia, an “independent U.S.-company.” Subway HQ has committed to refraining from direct investments or opening company-owned restaurants in the region, while pledging to channel profits from Russian operations to support humanitarian organizations. Nevertheless, Subway’s persistent advertising on its Russian Instagram account has drawn criticism and landed the brand on Ukraine’s International Sponsors of Russia’s War list.
Carl’s Jr., boasting some 17 franchised locations in Russia, also operates under a master franchisee model with CKE Restaurants Holdings asserting it has no control over the Russian Instagram page or local operations. Unlike Subway, however, CKE Restaurants has not publicly stated whether it contributes any profits from its Russian business to humanitarian causes.
The franchise model has been scrutinized by critics like Professor Jeffrey Sonnenfeld from the Yale School of Management, who argues that parent companies typically maintain control over their brand and its use in marketing. Even when a business has independent franchises in Russia, the parent company of food service brands such as Subway and Carl’s Jr. typically maintains full control over the use of its brand, logo, and other intellectual property in marketing, as stated by him.
The situation is complex. Carl’s Jr. and Subway’s deep roots in the Russian market, dating back to the post-Soviet era, coupled with the intricate web of franchise agreements, make a complete withdrawal a multi-faceted challenge. Master franchisees like Subway Russia Franchising Company LLC and Nevada Russia Franchising Company LLC, managed by a seasoned team of American businessmen with extensive experience in the Russian franchise industry, further entrench the chains in the market.
In a world where corporate decisions are increasingly scrutinized through a political lens, Subway and Carl’s Jr. remain in a precarious balance. On one side, there are strategic and financial considerations binding them to Russia; on the other, a growing moral imperative and reputational risk associated with operating in a country embroiled in conflict. The situation continues to evolve, with the international community keeping a close watch on how these American fast-food chains navigate the tides of geopolitics and business ethics.
Relevant articles:
– Russians still enjoying American burgers and sandwiches as companies refuse to leave
– The 2023 QSR 50: Fast Food’s Leading Annual Report, QSR magazine, Tue, 01 Aug 2023 07:00:00 GMT
– Why Some American Fast Food Chains Aren’t Closing in Russia, The Takeout, Fri, 18 Mar 2022 07:00:00 GMT
– The international companies refusing to leave Russia, Quartz, Wed, 15 Jun 2022 07:00:00 GMT