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Why some brands won’t be leaving Russia

As the conflict continues in Ukraine, and the unnecessary death toll rises, our thoughts remain with the Ukrainian people and all the innocents who have found themselves embroiled in Putin’s war. There has been a terrible cost for this ‘special operation’ which continues to amass victims on a daily basis whether physically, emotionally or financially.

In an article from the BBC last week, The Western brands unable to leave Russia, it highlights that despite massive social pressure there are some brands which can’t get out of Russia. Firms like Marks & Spencer, Burger King and Marriott – all have franchise arrangements which apparently make it ‘very difficult’ (maybe not impossible though?) to remove their brands from Russia. These particular companies are apparently locked into legal franchise arrangements – in the case of Marks & Spencer, apparently a Turkish company called FiBA have held the rights to sell the retailer’s products across Europe since 1999.

I do have some understanding of these difficulties. Back in the 1990s a colleague of mine was asked to manage an agency/distributor network in the middle east. The arrangement was ‘exclusive’ and by law, the manufacturer was not allowed to cancel the agreement, only the local agent could do that. Sometimes we enter into agreements without being objective enough about possible future events.

Back to the present day, and the current situation in Ukraine does of course continue to have implications for the respective brands in Russia. To offset some of the toxicity, some have taken to measures including suspension of new hotel openings, halting of investments, closing of offices, donations etc. It’s interesting to note that Burger King is creating a tangible distance between financial success and Russia by redirecting some profits from its franchisees to humanitarian efforts.

In summary, I suspect these brands are very concerned about potential reputational damage. History tells us that bad publicity can stick around for a long time – for example the relationship between a number of high-profile global companies and Nazi Germany during WWII.

Sam Macbeth, 24th March 2022

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