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Lego, the maker of plastic construction toys headquartered in Denmark, has terminated its franchise contract with a local store operator in Russia as it announced it would be shutting its business there.
According to CNN Business, the company is withdrawing its business in the country, and with this decision, around 90 employees in Moscow are set to lose their jobs. Lego cited "extensive disruption" in the region as the reason for this move.
The Danish toymaker already canceled its deal with the Inventive Retail Group (IRG), which is the local franchisee of the Lego toys. When the contract is still active, the company owns and runs 81 store outlets in the country.
IRG confirmed this week that its agreement with Lego has been cut short. It was learned that it was also the Russian franchisee of the Samsung and Nike brands.
On the other hand, despite the contract termination with Lego, IRG said that it still has plans to continue its business in the toy design and development category. However, it was not mentioned if it will forge a new deal with another company for this or if it will produce its own brand of toys.
The toy company already halted all shipments to Russia in March, and in June, it temporarily closed some stores due to supply issues. Now, Lego will stop all commercial activities in the country for an indefinite time only, although its deal with IRG was cut already.
"Given the ongoing significant disruptions to the operating environment, we have taken the decision to stop commercial activity in Russia indefinitely," Lego Russia's chief executive officer, Evgeny Chikhachev, said. "This includes terminating the work of a large portion of our Moscow team and our partnership with Inventive Retail Group."
Reuters reported that breaking off its contract with IRG may possibly be a signal that its operations in Russia have ended for good, but this is not confirmed.
Meanwhile, some of the well-known major US and UK brands are still operating in Russia amid the withdrawals of many companies. The main reason why they cannot retract their businesses is that they cannot force independent local franchise operators to shut down.
