When Russia decided to invade Ukraine, the western world decided to push back on the economy of Russia and many western companies were told by the government to not be involved in the Russian economy. For some it was relatively easy to implement, painful for the employees (who did nothing wrong, but they live in Russia) for other companies they had indirect holdings. In many countries, the American company wants partners and technically the partners are the company, the American company is just the face. Many people have read or watched a movie about the founding of McDonald’s and in their restaurants they have to maintain Quality, Quick and Cleanliness. In order to do that, McDonald’s often owns most of the locations (which technically makes it a real estate investment) as well as restaurant. However there are other models and Burger King’s parent Restaurants Brands International (RBI) followed the licensing route. The partners own the real estate, in this case RBI sells them the supplies and the manuals to ensure a Burger King is the same in Moscow as it is in New York.

In an article by Hilary Russ of Reuters, the formula for the joint venture partnership, including a master franchisee is harder to close the store. In March, RBI said it was trying to sell its stake in the joint venture. However in June the restaurants are still open with long line ups. Partly because McDonald’s which owned the real estate of all 80 stores could close down all the locations. The stores will open with a new name, and was sold to its local franchisee, but McDonald’s has the option to buy the business back with 15 years.

Burger King does not own its outlets, RBI owns 15% stake in Burger King Russia Ltd. The other partners are Russia’s state owned bank VTB , a private equity firm in Kyiv, Ukraine called Investment Capital Ukraine (ICU), and 30% owned by the master franchisee Alexander Kolobov.

The war in the Ukraine is not fought by the franchisees or the customers, it is the government and the Russian army, there is an argument made by lawyers it would be unfair to shut the restaurants down. Will Russian courts force the franchisee to stop operating? If RBI sells will it get fair market value or be a distressed sale? will the war be over sooner than later and then the sanctions will not apply?

Linking to dividend paying stocks, all companies at some time in their ventures consider diversification and there are many good reasons to doing so. There are different models to sell your goods and services to the world and when you do the world benefits from the company’s goods and services. If the company goes outside its borders and makes money, contributes to the profits of the company, analysts will write that is very good thing to be doing. Few will worry about exit strategies until the company loses money or wars happen, let us hope for peace.

There are more questions than answers, till the next time – to raising questions.