Fourteen months after Russia invaded Ukraine, KFC’s parent company completed its withdrawal from the country, selling the remaining restaurants to a local franchisee. According to Reuters, the deal transfers ownership of the Russian restaurants, operating system, and trademark to Smart Service, a Russian franchisee led by business people Konstantin Kotov and Andrey Oskolkov. The price was not disclosed.
The sale was delayed by new demands from Moscow when the agreement reached its final stages, according to Sergei Levin, who heads the legal department at Unirest, which manages the former assets in Russia of Yum! Brands, the U.S.-based company that owns KFC’s parent company, Yum! Brands. “There are new requirements that were not foreseen at the time of the initial agreement,” he told CNBC. “These requirements are related to the sanctions regime.”
It needed to be clarified what exactly the changes would be. But the rebranding could take 18 months. Until then, customers will find that it’s business as usual.
While the rebranding will change the names of more than 100 restaurants, the menus and design will remain the same. That’s similar to how former McDonald’s restaurants were rebranded last summer, when the company formally left Russia because of Moscow’s actions in Ukraine, allowing some locations to remain open and the menu to change barely.
Despite the departure of the fast food giant, many Russians are unfazed by the news and will continue to buy whatever they want, from burgers and fries to drinks. “We have enough Western goods,” said a 22-year-old woman named Valeria Varygina, who stopped by Rostik’s on a recent Saturday afternoon for a grilled chicken sandwich and a cup of coffee. “There will always be clothes, drinks, and food.”
KFC opened in Russia in 1995, and its total has reached around 1,000. Owners with franchise or licensing agreements operate most.
The chain has been under pressure since the start of the conflict in Ukraine, which was triggered by Russia’s annexation of Crimea. The war has prompted an exodus of multinational companies from Russia, including Apple and Starbucks.
However, unlike other foreign chains that have pulled out, KFC has allowed some of its outlets to remain open with no name change. This has given it a distinct advantage in the country where consumers are used to a certain level of uniformity and convenience.
The Russian government has also introduced more rigid rules to protect its domestic industry, including higher taxes for foreign investment. The move has slowed growth for many companies and boosted the prices of some products. The move is part of a broader effort to reduce the economy’s dependence on oil and natural gas exports. As a result, the nation’s population is growing, and inflation has risen. Those factors have contributed to lower consumer spending, causing some economists to forecast that the economy will slow this year. Nevertheless, the Russian central bank recently lowered its key interest rate from 9.5% to 8.5% and is expected to do so again next month.