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Franchising as a business model first came to Russia in the early 90s as compared to the mid 1950s in the U.S. In Russia, the first franchises were primarily Italian and American restaurant chains. Later such brands as AlphaGrafics, Baskin Robbins, Crestcom, Fastrackids, Gold’s Gym, KFC, Papa John’s, Pizza Hut, Sbarro and Subway appeared. Each already had a well-established scheme of marketing support for their franchisees and proven management methods, but results in Russia were varied.
Russian franchisors gain lead over foreign rivals
Foreign franchisors dominated the market for almost a decade without almost no professional competitors from the Russian business community. Several years ago, this situation began to change when franchising started experiencing more active growth. A number of successful Russian retailers (Piaterochka, Kopeika, Perekriostok, Sedmoi Kontinent), restaurant chains (Elki Palki, Mu-Mu, Tinkoff) and drugstore chains (Stary Lekar, Lavka Zhyzni, 36.6) began expanding in Russia using the franchising system, which helped them increase trademark recognition, win more customers, and to earn larger profits.
Marketing studies
According to a Smithbridge study, business format franchising is more developed in Russia than product distribution franchising. This is a result of keen demand from consumers for high-quality services in retail, restaurants and many other consumer-service areas. The study also found that of business people interested in franchising, 70 percent are interested in becoming franchisees, 15 percent are franchisors looking for interested parties, and 15 percent are business owners wanting to convert their firm into a franchise.
Why Franchise in Russia?
Large consumer base, which trusts foreign brand quality
Geographic coverage and position
Actively developing real estate market
Cheap labor
Significant interest by the Russian government in new business models
High demand for foreign services and goods
Lack of global competitors in the Russian market
Most Popular Types of Franchises
Based on inquiries received at Smithbridge, Russian entrepreneurs, investors and companies are looking for franchise opportunities in the following sectors:
Automotive Products/Car Wash
Childrens Services/Preschool
Clothing and Shoes
Educational Services/Training
Fast Food/Restaurant/Catering
Health/Beauty/Fitness
Hotels
Laundry/Dry Cleaning/Cleaners/Commercial Cleaning Services
Printing
Recreation Facilities/Equipment & Services
Retail Stores/Specialty Stores
Franchising Legislative Problems in Russia
There are still significant gaps in Russian franchising legislation. The rights of franchisors are not properly protected. For example, according to the Russian Civil Code, a franchisor is liable jointly with a franchisee to demands presented to the franchisee concerning goods or services being sold by the franchisee. But, local franchising entrepreneurs, with the help of the Russian Association of Franchising, are very actively cooperating with the government authorities to bring about legislative changes. Future of Franchising in Russia
Since franchising came to Russia only 15 years ago, it is still not developed at to its fullest. The Russian franchising market still has a long way to go before maturing. Franchising as an alternative business model to owning an independent business has a bright future in Russia.
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