NACP adds Subway to list of international war sponsors

The National Agency on Corruption Prevention (NACP) has added the American multinational fast food franchise Subway to the list of international sponsors of war. 

Source: NACP's report

Details: More than 500 company’s restaurants continue to operate in the Russian market, paying hundreds of thousands of dollars in taxes to the Russian budget. Subway actively advertises its activities through sanctioned Russian social networks and delivers food through Yandex services, which cooperate with the Russian government and law enforcement agencies.

Subway is one of the largest chains in the world in terms of the number of food outlets. It is known for its sandwiches, salads and rolls. The company positions itself as a "healthy alternative to traditional fast food". The Russian Subway chain is now the third largest in Europe after the UK and Germany.

The company has been operating in Russia for over 20 years, has created about 6,000 workplaces, and has 550 restaurants in 122 cities. Since the start of the full-scale invasion, the company has not reported any cuts in its operations in Russia.

The peculiarity of Subway's business is that it operates under the franchisee system, meaning that a large network of legally separate entities operates under the Subway brand, generating revenue and paying taxes. In Russia, the Subway franchise is owned by Subway Russia Service Company, headquartered in St. Petersburg.

Subway said that all restaurants in the country are independently owned and operated by local and master franchisees, so the restaurants remain open in Russia. 

Quote: "This statement regarding the inability to influence its own franchisees is untrue and actually misleading," the NACP said.

Thus, in May 2022, Russian banks began to block royalties because they were not ready to take responsibility for processing payments to the franchisor from an "unfriendly" state (the United States). Clients could not obtain ownership from Russian franchisees and send payments to the US.

Quote: "In this regard, at the request of Subway, the Russian law firm Nevsky IP LAW conducted the necessary analyses of contracts and sanctions legislation of Russia and found appropriate legal mechanisms that allow to legally collect royalties from franchisees and send them to the holding company," the NACP explained.

As a result, the company helped Subway to resume collecting royalties from its Russian franchisees. The banks resumed processing payments, and the franchisees returned to fulfilling their royalty obligations.

The Agency added that Subway in Russia actively conducts advertising campaigns through the social networks VK and Odnoklassniki, which belong to the sanctioned legal entity VK Company LLC. Subway also uses food delivery services through Yandex.Eda service.

Yandex services have previously been included in the list of candidates for NACP sanctions.

Reminder: Since the beginning of the full-scale war and until the end of November 2023, the NACP has added more than 30 companies to the list of international sponsors of the war.

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