Subway
We helped the largest fast food chain resume payment processing in a complex international environment
Case
About the client
Subway Russia is an international fast-food restaurant chain operating under a franchise model. It is the world’s largest restaurant chain in terms of the number of locations in the foodservice industry.
Objective
Develop new approaches for the operations of Russian divisions of international companies registered in "unfriendly" countries. The client needed to restart the receipt of royalties from Russian franchisees, which had in fact been halted based on the decree issued by the President of the Russian Federation in May 2022.
Problem
The intellectual property rights of Subway are held by companies registered in the United States. In May 2022, the servicing banks started blocking royalties as they were not prepared to take responsibility for processing payments to the franchisee from an "unfriendly" country. Franchisees also suspended payments amid increased uncertainty.
The client was unable to collect royalties from Russian franchisees and remit payments to the United States.
How we resolved it
- Conducted an analysis of the client’s corporate and contractual relationships within the company group, as well as relationships with franchisees under commercial concession agreements
- Analyzed the counter-sanctions legislation of the Russian Federation concerning transactions involving intellectual property between residents of Russia and residents of "unfriendly" countries
- Submitted lawyer inquiries to the servicing banks
- Prepared a legal opinion, sent explanatory letters to banks and franchisees, and supported the communication process with the franchisees
- Offered the client a series of additional measures, including targeted inquiries to the Ministry of Economic Development and Rospatent.
- Identified suitable legal mechanisms that enable a lawful collection of royalties from franchisees and the redirection of royalties to the holding company
Result
We assisted the client in resuming royalties from Russian franchisees. The banks resumed processing payments, and the franchisees resumed the fulfillment of their obligations to pay royalties.
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