Russian franchises in neighboring countries: features, experience and advice

Russian franchisors and their foreign franchisees share their business development experience in neighboring countries and give advice to those who are not afraid to cross borders.

The number of Russian companies that are ready to try their hand abroad is growing every year. Most of them choose neighboring countries for their international debut, which is explained by understandable logistics, a low language barrier and the availability of free niches for formats that are dynamically developing in Russia. Nevertheless, there are differences between franchising in Russia and abroad, and sometimes they are quite significant. The Buybrand.ru editors asked Russian franchisors and their foreign franchisees to talk about the development of franchising in neighboring countries.

Search for franchisees abroad

It happens that future partners find a franchisor themselves. For example, a partner of the group of companies «Shokoladnitsa» in Kyrgyzstan, he got in touch through the website, says Maxim Trubnikov, director of the franchising department. However, in most cases, the franchisor is also not sitting idly by. According to Trubnikov, franchisees in Uzbekistan came to them through networking — Establishing relationships with potential partners is facilitated by active communication with colleagues in the market, participation in exhibitions and conferences.

“Partners usually find us themselves, but not without our participation. Periodically, we conduct advertising campaigns in our priority regions to inform entrepreneurs about our franchise, — says the head of marketing department Franchising "Sushishop" Christina Bolshakova.

Retailer «220 Volt», present in Belarus since 2016 and since 2017 — in Kazakhstan, also used different channels to find foreign franchisees. “Someone was covered by our contextual advertising, met someone at the exhibition, someone saw our store and called to find out the details,” — notes Polina Grishankina, director of the company's franchising department.

"It's always a different experience, — says the franchising director of the Askona group of companies Denis Mitrofanov. — Many partners turn to us with a proposal for cooperation after a personal acquaintance with the company's products, we get to know some of them at specialized exhibitions and conferences. If the brand has a task to be represented in the market of a certain country, then we independently conduct an active search for potential franchisees. Among the partners working with the brand abroad, there are both local (large furniture makers) and Russians, he adds.

By the way, not only Askona connects Russians to the development of the brand abroad. Thus, the network of coffee houses "Pravda Coffee" opened the first two points in Alma-Ata with franchisees from Moscow: a top manager of a large company planned to launch a business in the Russian capital, but he was sent to design work in Kazakhstan, and he risked opening there already.

Russian franchisors use different formats of cooperation with foreign partners. So, "Chocolate Girl" in Uzbekistan and Kyrgyzstan it sells only a master franchise for the capital — it has one franchisee each in Tashkent (two points) and Bishkek (three points). Askona has sold a master franchise to Latvia, where a partner has opened three stores this year in Riga. But in Georgia, the company, which has been represented in Tbilisi for three years, is ready to open with new franchisees. "220 Volts" does not sell a master franchise, and in Kazakhstan at the moment it has settled on cooperation with 5 franchisees. And "Sushishop", for example, in some cases sells an exclusive for the region — for example, Belarusian Bobruisk is assigned to one partner.

Franchise Differences

Representatives of a number of Russian franchisors told Buybrand.ru that their franchises for other countries practically do not differ from the package that is relevant in the Russian Federation. According to Kristina Bolshakova (Sushishop), they encounter some peculiarities in local markets, but they are generally insignificant. The menu does not have to be changed.

"Of course, small adjustments to the financial model occur when it is adapted in a particular country, we are flexible in this matter, but they are insignificant and do not globally affect the project's economy", — for his part, Maxim Trubnikov (“Chocolate Girl”) notes.

Hobby World offers franchising conditions for Hobby Games board game stores for other countries (we are talking about Kazakhstan and Uzbekistan. — Ed.), which are 90% identical to Russian ones, says the franchising director of Hobby World LLC Sergei Shishkevich. The main difference is that, for technical and legal reasons, the brand loyalty program tied to the 1C8 "Trade Management 11" system does not work abroad. In addition, the option of free delivery of goods to a partner, which is available in Russia, does not work abroad, but there Hobby World partners receive additional retro bonuses for shipment volumes.

In "220 Volts" they say that they have redesigned the software for the peculiarities of Kazakhstan. “The commodity matrix has undergone significant differences. Not all goods and not all trademarks that are popular in the Russian Federation are bought in Kazakhstan, », — Polina Grishankina told.

But representatives of Pravda Kofe, which specializes in the "coffee to go" format, distinguish significant differences due to the peculiarities of the culture of the inhabitants of Kazakhstan and, in particular, Alma-Ata. “The rhythm of the city, seasonality and other factors significantly affect pricing, assortment, deliveries and taxes. I had to revise the price of coffee down. Now it is 450/600/750/900 tenge, which is lower than prices in the Russian Federation for high-margin positions, — explained network development director Artem Kopaev.

All this affected the formation of the average bill and assortment, and financial planning. "True Coffee" halved royalties for a partner in Kazakhstan, and was also able to negotiate with distributors on deliveries to the region with great difficulty. “In addition, the document flow and the profitability of the partner’s business are becoming more complicated due to the tax legislation of Kazakhstan,” — added Kopaev.

"The main difference in working with foreign partners — it is the need to translate advertising banners in stores, promotional printing and training materials for staff into the local language, — Denis Mitrofanov (Askona) talks about work in Georgia and Latvia. In pricing, the company focuses on samples of the local market, trying not to go into the economy segment.

Regional features

Georgia

"Georgia — for us a more complex case than, for example, Belarus, Armenia, Kyrgyzstan, », — says the head of the franchising department of the Askona group of companies Denis Mitrofanov. According to him, due to historical and political events, trading Russian goods in this country is more difficult in terms of interaction with buyers, and also more expensive than selling Azerbaijani and Turkish products. The Askona representative also draws attention to the rather low average income in Georgia — 150-250 USD per month per person.

“The specifics of purchasing power in Georgia is that consumers choose goods of a lower price segment. Due to the low level of income, buyers make a choice in favor of cost at the expense of quality. After some time, when the product becomes unusable, people will prefer to replace it with an equally inexpensive one, instead of initially making a choice in favor of a higher quality, but also more expensive product,” — notes Mitrofanov.

Uzbekistan

There are some foreign franchises in Uzbekistan and there are some local brands that have gone abroad. “But their number is very small, and the franchising market itself is poorly developed,” — says the president of the Eurasian Franchise Association (EAF) Beknur Kisikov. At the same time, the expert sees a trend towards the development of the franchising market in this country, especially taking into account the new economic policy announced in Uzbekistan.

According to Anvar Kurmaev, Hobby World franchisee in Tashkent, the state does not provide subsidies, but does not create obstacles for entrepreneurs, and encourages small business in general. He notes the fact that Uzbekistan is not a member of the Customs Union, and therefore there are customs charges. They are felt by entrepreneurs working on a simplified taxation system. “In general, this is not a problem if you increase turnover and switch to VAT and generally established taxes,” — he believes.

Now there are many Russian speakers in Uzbekistan, so Hobby World did not need language adaptation of the product — this has not even been discussed yet, says Kurmaev.

As for the payback period, in Uzbekistan they are 1-1.5 years longer than in Russia, says Kurmaev. The difference in the purchasing power of the population, and in the case of board games — also in the ignorance of local consumers. For many, this is a new direction and leisure opportunity, he adds.

"A significant part of the franchises in the region is related to the catering industry. Uzbekistan is rich in its cuisine, and consumers most often prefer national catering formats — due to a kind of long-term autarky, here they always preferred to manage with all their own. But the country is gradually opening up to the world, a new generation of millennials is integrating with the global consumer market, and one can notice an increased interest in global catering formats, as well as in international brands. In addition, the Uzbek market has great potential for the growth of franchises in the field of tourism, hospitality, education and business services.

Kyrgyzstan

Kyrgyzstan, and especially Bishkek, has a cosmopolitan culture and an open market, Kisikov notes. This country was one of the first in the CIS to join the WTO, so the level of trade and business processes there is quite developed.

"Despite the lower level of purchasing power, new brands are accepted with interest in the country", — says the expert.

Kyrgyzstan is a member of the Customs Union, which makes it easier to import goods from Russia.

“In general, Kyrgyzstan has a favorable environment for entrepreneurship. In view of the fact that our market is still in the active stage of growth and development, the culture of consumption is only being formed. Therefore, franchising enterprises evoke mostly positive responses, », — says Choupette franchisee in Bishkek Aikanysh Akhmatova.

 Local consumers are just getting used to the market format and are switching to shopping centers. Therefore, official mono-brand outlets, including those operating under a franchise, stand out due to service standards and regular updating of the assortment.

According to Akhmatova's forecast, in 10 years 70% of Bishkek residents will prefer shopping in shopping centers.

Akhmatova advises companies planning to enter Kyrgyzstan to take into account the peculiarities of logistics and the state of the country's economy. If the main logistics center is located in Moscow, then it is — when ordering a batch of goods from the regions — acts as a hub. Often this increases the cost of transportation at times, warns Choupette franchisees.

“Purchasing power in Kyrgyzstan is much lower than in Russia. Therefore, those goods that Russians fall under the category of “medium”, in our country it is “medium plus”, and even “premium”, — adds Akhmatova.

Kazakhstan

As Kisikov notes, in terms of conditions for business development, Kazakhstan stands out among its neighbors in the region. The first foreign brands came to the country back in the 1990s; since 2002, the law on franchising has been in force in Kazakhstan. The country's economy is quite open and attractive for investors due to the high level of income of the population. The oil-bearing west of the country, as well as Alma-Ata and Astana (Nur-Sultan) are especially popular with foreign companies.

"An open financial market with adequate conversion, clear taxation and measures to attract investment allow franchise brands to grow", — describes the main advantages of the President of the EAF.

At the same time, Russian franchisors often encounter local socio-cultural characteristics that can have a significant impact on the business of certain segments and formats. This is talked about, for example, in the Pravda Kofe network, which works with the to-go format (“to go with you”): it has already arrived in Kazakh cities, but “met” its not quite the same as in Russian.

“Traditions are strong in Kazakhstan: whether it’s lunch or a cup of coffee, everything should take place in an appropriate setting and atmosphere — leisurely drink coffee, eat a cake or salad. This is a whole ritual that is somewhat alien to us, », — says Artem Kopaev. Based on the experience of two Pravda Coffee points opened in Alma-Ata; already convinced that the corners in the business center — work, but in the street retail format «take away» not so popular yet.

The Hobby World franchisee in Alma-Ata, Allayari Rabin, for his part, notes that the local board game market “is not yet developed — neither in terms of supply, nor in terms of consumption.

Director of the franchising department "220 Volt" Polina Grishankina talks about the specifics of relationships with local franchisees. “Companies need to understand that Eastern people have a different mentality and some of their actions seem illogical,” — she emphasizes. Thus, a Russian franchisor explains to partners in Kazakhstan that family ties at work are undesirable: “By hiring your brother, matchmaker, friend for a responsible position (administrator or store director), you risk losing sales. Because you will ask more strictly from a stranger, if necessary, punish with a ruble, and you will only regret your own soul».

According to Grishankina, the franchisor has revised the offer of standard KPIs that it recommends entering for store employees. But the company still has to convince franchisees in Kazakhstan that these KPIs need to be incorporated into staff motivation. There are certain nuances in the delivery of goods from the franchisor to the franchisee: each tool must have the necessary licenses and certificates.

Most Popular Market

Many well-known Russian franchisors are already represented in Kazakhstan, often in several cities at once. And almost every month there are one or two companies declaring their intention to open the first franchise point in this country.

There is no exact data on the number of Russian franchises in Kazakhstan, since according to local law, it is not necessary to register contracts with the Ministry of Justice. President of the Eurasian Trade Association Beknur Kisikov speaks about about 200 Russian franchises represented in Kazakhstan.

“If we talk about the segments, they are most represented in the catering and retail segment, followed by medicine, business services and education. The sphere of children's education and services is growing, », — he clarifies.

Why Kazakhstan?

"For a Russian franchise that has prepared a package of documents and tested the brand in Russian cities, it is most often comfortable to enter the Kazakhstani market.

There are many reasons. One of them — purchasing power and loyalty to Russian brands. Sometimes, Kazakh buyers will prefer to buy foreign, including Russian, rather than local.

The mentality is very similar. In general, the psycho-behavioral portrait of buyers in both countries is similar, both in terms of language (most Kazakhstanis are fluent in Russian) and cultural.

An important factor of logistics cannot be overlooked: railways and highways are interconnected between the two countries, and there are few barriers at the border.

An important role is played by the protection of intellectual property, in particular — Eurasian patent, facilitating the circulation of trademarks».

What franchisees say

Alexander, Pravda Coffee in Almaty:

— I had no business experience before. I bought a franchise in Moscow, but was subsequently assigned to work in Alma-Ata. When I learned the details of the project, I realized that my investment in the True Coffee franchise was in Moscow will not be implemented soon. Therefore, I ventured to launch in Alma-Ata.

The first coffee shop with a landing was opened in April 2018 with the expectation of students from nearby universities, the second — on the eve of the May holidays in 2019 in one of the business centers.

Taking into account the year of work, more than 5.5 million rubles have already been invested in the first coffee house, and 1.8 million rubles in the second. The second coffee shop is already operating and does not require investment. I expect to start returning investments by the beginning of autumn.

The most expensive, as it turned out, was the cost of renting and importing equipment into the country — double taxation under local law. There is also a fairly high turnover, which affects financial planning.

 Pravda Franchise sharpened for the metropolis — to Moscow, to the corresponding market conditions. Alma-Ata — the city is smaller, the rhythm of life in it is not so high. I understood that I was taking risks, and had no illusions. The search for suppliers, recruitment, compliance with the law, taxation and other organizational issues were on me. On "Pravda" there was a start, the launch of a business — training, assortment development.

Promotion plans that the Pravda team was building were broken by the realities of the region. A week before the opening, they dug up the entire sidewalk for almost 4 months, and I worked for nothing, paying rent and staff salaries.

In general, it is difficult to run an unfamiliar business, and even in a foreign country. Now there is an understanding of what to do next. We have already worked out a program of further steps. Let's see what happens.

Aikanysh Akhmatova, Choupette in Bishkek:

— By the time the Choupette store opened, we already had clothing and footwear stores, [to open in Bishkek — Note. ed.] Initially, 3.2 million rubles were invested, of which about 50 & ndash; 60% went to retail equipment and repair and finishing work. But later it turned out that in order to regularly replenish the assortment, due to high demand, at least 1.5-2 million rubles more are needed. During the first year, we actively increased the turnover. We hope that at the end of the second year we will be able to reach net profit, while significantly increasing sales volumes.

After the opening of the Choupette store, our customers were divided into two camps: those who were already familiar with this brand (they were a minority), and those who were skeptical of Russian-made clothes.

We have tried many marketing moves to attract customers and gain their trust. Various promotional materials were printed with their subsequent distribution in private medical centers and maternity hospitals. Influencers were attracted by organizing joint actions. They resorted to outdoor advertising and actively promoted in SMM. All this together has borne fruit.

After a few months, we realized that we could not cope with the timely sorting of models and size ranges. The decision was made to make shipments once a week, based on a detailed daily analysis of customer demand, since Choupette's business model allows this. We believe that this decision has become strategically important in the development of this business. We have significantly increased the percentage of return customers, many of them have become in the habit of regularly visiting us for new products.

We are sure that next year we can safely open a second point. We plan to capture new customer flows in other shopping centers.