McD to franchise in Russia for first time

McD to franchise in Russia for first time

Deal with Russian franchisee Rosinter will allow chain to expand in airports, rail stations

McDonald’s Corp., which entered Russia in 1990, will begin franchising in that market for the first time under a new deal with Rosinter, the country’s largest restaurant holding company, according to a report in Reuters [3].

McDonald’s Russia reportedly still plans to open 40 to 45 company-owned restaurants per year in the country, but the deal with Rosinter would allow the quick-service chain to start expanding in nontraditional locations like airports and railway stations. Rosinter operates T.G.I. Friday’s franchises and is a joint-venture partner in Russia with British company Whitbread to develop the Costa Coffee brand.

There are currently more than 300 McDonald’s restaurants in Russia.

The country is the fastest-growing market in McDonald’s European division, officials have said in previous earnings calls. The original McDonald’s in Russia, in Moscow’s Pushkin Square, has more than 20 cash registers and is one of the chain’s busiest restaurants in the world. Khamzat Khasbulatov, president of McDonald’s Russia, started his career with the company as a manager at the Pushkin Square location.

Many of McDonald’s competitors plan to expand rapidly in Russia. Subway has said it plans to have 1,000 restaurants in that market by 2015, while Burger King entered Russia for the first time in 2010.

In June 2011, Wendy’s partnered with Wenrus Restaurant Group to open its first franchised unit in Moscow’s Arbat District [4], the first of 180 Wendy’s locations planned to open by 2021. Last week, Wendy’s also said it would open 25 restaurants over the next 10 years in neighboring countries Georgia and Azerbaijan [5] with a separate franchisee, The Wissol Group.

Russia also is a significant growth market for KFC [6]. Earlier this year, David Novak, chief executive of parent company Yum! Brands Inc., said KFC has not completely reached its operating potential in the country but still is doing “fantastically well.”

“We have 150 units in Russia with great margins, and we haven’t even begun to do this brand right,” he said.

Yum entered Russia several years ago by co-branding its KFC chain with Rostik’s, a chicken chain native to Russia, achieving the scale in three years that Novak said would have taken a decade with the typical approach to building out a foreign market. Yum now is converting all co-branded locations into standalone KFCs and building some new KFC units. Some of the first full KFC restaurants in Siberia have average unit volumes of $1.4 million.

In February, Moe’s Southwest Grill, a division of Atlanta-based Focus Brands, signed a development deal with Glaventer Investments Ltd. [7] to open 50 locations in Russia over the next 10 years. The first Moe’s unit is scheduled to open this year in Moscow.

McDonald's had not returned calls for comment by press time.

Oak Brook, Ill.-based McDonald’s operates or franchises more than 33,000 restaurants in 119 countries.

Contact Mark Brandau at [email protected] [8].
Follow him on Twitter: @Mark_from_NRN [9]