Russia-Ukraine

He’s American, he oversees Papa John’s in Russia, and he’s staying

"At the end of the day, they appreciate a good pizza."

A Papa John’s delivery driver arrives at an apartment complex in Moscow on July 24, 2011. The company has suspended its corporate operations in Russia. James Hill/The New York Times


Papa John’s International said last week that it was suspending all of its corporate operations in Russia, following in the footsteps of other high-profile American brands like McDonald’s and Starbucks.

However, the 190 Papa John’s restaurants in the country are still open and selling pizzas. And they have no plans to stop.

These Papa John’s shops are primarily owned by Russians through a franchise agreement with a company controlled by Christopher Wynne, a Colorado native who has lived part time and worked in the country since the early 2000s. And even as the war with Ukraine continues and numerous global food brands and retailers suspend operations and stop selling goods in Russia, little has changed with his operation, said Wynne, 45.

Advertisement:

“The best thing I can do as an individual is show compassion for the people, my employees, franchisees and customers without judging them because of the politicians in power,” he said.

On the day in late February when Russia recognized two Ukraine provinces as independent, Wynne said, an anxiety blanketed the country since many Russians have friends and family in Ukraine. Nonetheless, “customers were showing up as usual,” he said.

And despite various sanctions that have made international financial transactions exceedingly difficult, Wynne said, internal credit card payment systems and the internet still work normally.

“The vast majority of Russian people are very clearheaded and understand the dark gravity of the situation they’re in,” he said. “And, at the end of the day, they appreciate a good pizza.”

Wynne, who has a home in Moscow, has plans to open 20 to 40 more restaurants in the country this year. He did acknowledge those plans could be derailed by two factors: a deep contraction in Russia’s economy — he noted that consumer confidence was very low as people lost their jobs — and any retaliatory move by the Russian government against American and European brands that have paused Russian operations.

Wynne said he hoped his business, PJ Western, which had $59 million in revenues in 2020 and oversees the franchisees that employ 9,000 people, “will not fall in this category since the business continues to operate.”

Advertisement:

“But those which are closing will face increased scrutiny from the government,” he said.

Last week, President Vladimir Putin warned that the government could nationalize the assets of companies that had left Russia.

Wynne has significant financial incentive to keep the restaurants open. The company he founded has various partners and investors, including Alex Ovechkin, the Washington Capitals hockey star, who has previously expressed support for Putin; the Finnish private-equity firm CapMan; and the Russian private-equity firm Baring Vostok. Its assets totaled $85 million, but it also had more than $88 million of short- and long-term debt, according to a 2021 filing with the Securities and Exchange Commission.

Wynne’s history in Russia dates to the early 2000s. That’s when, after working to foster cooperation with nuclear nonproliferation as a contractor with the National Nuclear Security Administration in Washington, he moved to Moscow with $20,000 worth of used computers that he began to sell. In 2007, he had the opportunity to buy a stake in the Papa John’s pizza franchise in Russia, and he took it.

He formed PJ Western and became the master franchisee for Papa John’s in the region, taking over four restaurants in Russia. The contract gives him the ability to sign subagreements that allow others to open their own Papa John’s restaurants in the area.

Advertisement:

Over the past 15 years, Papa John’s growth has been robust in Russia. Today, there are more than 190 stores in the country, and Wynne has started to expand to Poland and Germany. Last year, PJ Western sold its stores and now collects royalty payments from the franchisees in exchange for services like marketing, running the websites and handling the supply chain, Wynne said.

In the past two decades, one of the fastest and easiest ways for recognizable American brands to establish fast-food footholds in Russia has been through franchising. The decidedly capitalist, entrepreneur-driven model, used widely in the United States, was embraced in Russia as the country’s citizens, as well as individuals and groups from other countries, opened KFCs, Pizza Huts, Starbucks, Burger Kings and Papa John’s locations across the country.

Last week, though, as pressure intensified for food companies and restaurants to take a stance against Russia’s invasion of Ukraine, many announced they were pausing operations or temporarily closing restaurants in Russia. For McDonald’s, the decision to temporarily shut all restaurants, while difficult for a company that has operated in the region for 30 years, was logistically easier since it owns 84% of the 847 McDonald’s locations in Russia. (All 847 are closing, and McDonald’s told investors last week that it would spend $50 million a month on leases, employee salaries and other expenses.)

For other fast-food chains, though, the move to suspend operational support is more symbolic than literal largely because of the franchising model.

For instance, Restaurant Brands International said it was “suspending support” for the Russian market, but did not detail what that would mean for the 800 Burger Kings in Russia that are owned by franchisees. Media reports in 2019 said 550 Burger King restaurants in Russia were owned by an investment-based consortium led by the investment arm of the Russian state-owned VTB Bank. VTB’s website in Russia could not be accessed.

Advertisement:

In a statement, Restaurant Brands International said: “We cannot speak on behalf of our franchisees. Regarding the business in Russia, we can confirm that we are in full compliance with all applicable sanctions.”

Likewise, last week Yum Brands said it was shutting down the 70 company-owned KFC restaurants in Russia and completing an agreement to close 50 franchise-owned Pizza Hut restaurants, but it was unclear whether the remaining 900-plus KFC restaurants in Russia that are owned by franchisees would remain open. In 2018, Russian media reported that VTB was part of an investment consortium that had acquired 180 KFC restaurants. Yum Brands did not respond to an email seeking comment.

Politics aside, the reluctance among the Russian-based franchisees to close their doors has much to do with the fact that they, not the parent corporation, have invested money and taken on significant financial risks in operating the stores. While the parent company may provide advertising dollars and strategy, and other support, the franchise owner is responsible for rent and electricity, construction costs to meet corporate standards, franchise fees or royalties, employee wages, and the food.

So while temporarily closing restaurants in Russia may have little impact on the overall revenues or profits of big companies like Papa John’s or Yum Brands, it could mean financial ruin for these smaller operators.

“These are Russian-owned businesses, owned primarily by Russians or Russian institutions, that don’t share our beliefs or requirements,” said Michael Seid, founder of MSA Worldwide, a global franchise advisory firm. “The Russian franchisee has debt, has to pay the employees. They’re going to do what is in their best interest, and it will all get sorted out later.”

Advertisement:

In the two weeks after Russia invaded Ukraine, Wynne said, it was clear from his conversations that executives with Papa John’s in the United States were nervous. Last Wednesday, Papa John’s temporarily cut ties with Wynne’s business in Russia when it said it would no longer “provide operational, marketing or business support to the Russian market.”

“Our perspectives diverged fairly quickly,” Wynne said a day later in a Zoom interview from Milan, where he was visiting before he planned to return to Russia this week. “I have a perspective where my interest is first and foremost my employees and franchisees and keeping the lines of cultural exchange with the Russian people open,” Wynne said.

“Papa John’s is worried about the corporate and political winds that, on a day-to-day basis, I cannot focus on,” he added. (Wynne’s business interests go beyond Papa John’s. During the pandemic, he began a CBD business in Colorado.)

In an emailed statement, Papa John’s said it believed its decision to pause operations in Russia was “supported by the vast majority of our team members, franchisees, customers and communities around the globe.”

Wynne’s wife is Russian, and the couple have a 2-year-old daughter. They have a farm in Colorado that they consider home, but still spend considerable time in Russia. While there, Wynne said, he spends his time during the week visiting Papa John’s locations “from Moscow to Siberia.” On the weekends, he goes fishing, takes family hikes in the hills outside Moscow and takes his daughter to the city’s playgrounds.

Advertisement:

He said it “has never been my responsibility or right to comment about the politics in Russia,” instead focusing on the opportunities he believed his business gave to people in the country.

“The current situation will increase the challenges we are faced with, but I believe that what we are doing is the right thing to do,” Wynne said.

While he prefers to focus on business rather than politics, geopolitics have affected his business operations over the years. In 2014, when the United States enacted sanctions on Russia after it illegally annexed Crimea, Wynne had to scramble to rework his supply chain system.

“In 2013, about 92% of my supply chain was imported,” he said. After the sanctions were put in place, Wynne, whose company had previously funded construction of two fresh dough production facilities, added seven more and began working with Russian farmers and manufacturers to produce the tomatoes, mozzarella cheese and other ingredients he had imported.

“We switched to an entirely localized supply chain,” Wynne said. “The only thing we import is olives.”

This article originally appeared in The New York Times.

Conversation

This discussion has ended. Please join elsewhere on Boston.com