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U.S. chains ramp up growth abroad

With domestic development slowed greatly among many U.S.-based chains during the past 18 months, international expansion deals have taken on a new importance.

American franchisors are looking harder at expansion opportunities on foreign shores as they face depressed sales and cash flow at home, along with fewer financing sources for domestic franchisees.

While some heavily franchised chains, such as Quiznos, have made general announcements about their intention to beef up international recruitment efforts, others, such as Wendy’s/Arby’s Group, Freshii and The Great Steak & Potato Co. have recently inked development agreements with established operators.

Wendy’s/Arby’s International, a subsidiary of Atlanta-based Wendy’s/Arby’s Group, said Tuesday it had signed an agreement under which Wenrus Restaurant Group Ltd. of Moscow is to open 180 dual-brand Wendy’s and Arby’s restaurants in the Russian Federation during the next 10 years.

Rival McDonald’s this year celebrated 20 years in Russia, where it now has more than 240 restaurants, while competitor Burger King opened its first branch there in January.

Wenrus is affiliated with Food Service Capital, which now operates 28 restaurants, including Goodman Steak Houses in Moscow and Novosibirsk in Russia; Kiev, Ukraine; and London. Wendy’s/Arby’s said Food Service Capital’s various holdings include RPCOM, which, in addition to Goodman Steak Houses, operates Filimonova & Yankel, Kolbasoff and Mamma’s Pasta in Russia, the Ukraine and the United Kingdom, and the Komfis and ESP food production companies and Legion food-distribution operation.

“This is a key step in the continued acceleration of our international development strategy,” Roland Smith, Wendy’s/Arby’s Group president and chief executive, said in a statement. “Russia is a dynamic market which offers significant long-term expansion potential. We are very pleased to partner with WRG — their extensive knowledge of the Russian foodservice market will allow us to bring our premium hamburgers and roast beef sandwiches to consumers across the country.”

Also this week, Wendy’s/Arby’s International said it has signed a 10-year agreement with a group led by veteran operator Dane Darbasie to develop 24 Wendy’s units throughout Trinidad and Tobago and eight other markets in the Eastern Caribbean.

Chief executive Smith said the move makes sense. “In the north, our franchise restaurants in Puerto Rico and the Bahamas generate some of the highest annual unit volumes in our international system; and, in the west, we have a growing presence in Central America,” Smith said.

Darbasie has 17 years of restaurant experience, including serving 12 years as chief executive and director of Prestige Holdings Ltd., a publicly traded franchisee of KFC, Long John Silver’s, Pizza Hut and T.G.I. Friday’s based in Port-of-Spain, the capital of Trinidad and Tobago. His group will open its first Wendy’s in Trinidad in 2011, Wendy’s/Arby’s said.

At the conclusion of their last fiscal years, ended in January, Wendy’s and Arby’s had a combined 9,473 restaurants in the United States and 786 units in U.S. territories and foreign countries.

Great Steak & Potato Co., a cheesesteak sandwich chain with 161 restaurants in the United States and nine in Kuwait, this week said it has signed Pastelerías Servicios Corporativos SA de CV as its master franchisee for Mexico. Pastelerias Servicios operates or franchises more than 100 Suspiros Pastelerias brand bakeries in 10 states throughout Mexico’s northern and central regions.

Great Steak officials said the bakery-chain operator has agreed to open 30 restaurants during the next five years as part of a 10-year agreement with a 10-year renewal option, including the first Great Steak restaurant in Mexico, which is scheduled to debut in October in Hermosilla.

Multiconcept franchisor Kahala Corp. of Scottsdale, Ariz., owns Great Steak & Potato Co. Dan Beem, president of Kahala’s international division, said six-year-old Pastelerías Servicios Corporativos continues to “revolutionize” the pastry industry in Mexico and is well positioned to introduce the Great Steak & Potato Co. concept to Mexico.

Toronto-based Freshii, with about 20 locations in Canada and the United States, said Monday that it will open four restaurants in Vienna, Austria, this summer and expects to debut a fifth in the fall. Freshii's menu includes burritos, rice bowls, salads, soups and wraps.

Freshii founder and chief executive Matthew Corrin said in a statement that Vienna “has a huge potential for fresh food, custom-built for take-away.” He also noted that the Vienna residents are becoming more health-conscious and that while “competition in the food industry [there] is high…the level of innovation is low,” making that market a good fit for Freshii.

The Nation’s Restaurant News 2010 Top 200 census of U.S. foodservice chains showed that, in aggregate, the 200 largest players saw domestic new-store growth slow to 0.53 percent in their latest completed fiscal years, compared with growth of 1.76 percent in the preceding year.

International expansion — though not without its challenges tied to learning new cultures, adapting menus and creating dependable supply lines — for a time has been vital to some of the largest U.S. players as well as up-and-comers.

Oak Brook, Ill.-based McDonald’s, in its latest completed fiscal year ended in December 2009, saw 88 percent of its net 511 additional restaurants open outside the United States. Its burger business rival, Miami-based Burger King, for the fiscal year ended in June 2009, said a full 94 percent of its net 360 additional restaurants opened in countries or territories other than the United States and Canada.

In terms of worldwide restaurant counts, 56 percent of the McDonald’s system now lies outside the chain’s headquarters country, while restaurants outside the United States and Canada represent about 37 percent of the Burger King system.

Contact Alan J. Liddle at [email protected].


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