Real Estate Revival Confirmed by Data
Official data has confirmed the revival on the Moscow real estate market that participants have been talking about for several months.

In March and April, there were nearly twice as many apartment sales on the second hand market than in January and February: 9,124 compared with 4,626, respectively, according to data from the Moscow branch of the Federal Registration Service.

“The March-April figures reflect the demand bubble that we recorded in February-March,” said Dmitry Taganov, director of Inkom’s analytic center.

“And the lower indicators in January-February reflect the fall in demand at the end of last year,” he said.

Without question, there are more sales now compared with January and February, said Grigory Poltorak, president of Best Realty. “People are recovering: They were promised housing for next to nothing, but the miracle never happened, and sellers aren’t significantly lowering their prices,” he said.

Demand is slowly returning, and buyers are more and more making purchases, said Alexei Kudryavtsev, head of marketing at the real estate company MIAN.

“We haven’t noticed a significant change. Altogether the situation hasn’t gotten worse, but nor has it gotten better,” said Omar Gadzhiyev, managing partner of Panorama Estate. “Demand has become more active, but it has an observational character,” he said.

Compared with last year, there are several times fewer deals being concluded, said Poltorak of Best Realty.

But Federal Registration Service data does not confirm that view: In January 2008, there were 1,951 purchases registered, compared with 2,674 deals in the same month this year.

On average, the first four months of this year saw a fall of 26 percent compared with the same period last year.

More than half of this decline can be explained by the steep drop in the number of mortgage deals. In the first four months of this year, only 1,094 mortgages were secured, compared with 3,622 in the same period last year.

If not for the deals lost because of the fall in mortgages, the year-on-year drop would only be 12 percent, said Alexei Dorosh, director of sales at mortgage broker Kreditmart.

The rate of decline of dollar-denominated offer prices for Moscow apartments has slowed and by the end of April stood at about 0.5 percent to 0.8 percent per week, several times less than in January and February, according to IRN.ru.

IRN.ru put the maximum dollar price at $6,122 per square meter on Oct. 6 — now it stands at $4,206.

But deals are rarely concluded at the offer price. “If you sell an apartment at a big discount, it will go quickly. But if you hold it at midmarket price, then it will take a while,” Gadzhiyev said. “Calls come in immediately for those apartments whose owners are lowering the prices by at least 10 percent.”

There is some haggling now, but no serious discounts like those that developers are giving.

Tags: Add new tag, Moscow, Real Estate, Russia

Retail Opportunities Abound in Russia
Franchising Avenues Remain Resilient
Despite misgivings about previous economic crises, Russia is expected to witness more steady retail sales growth in 2009. However, depending on the unique aspects of local markets as they’ve been sculpted by their specific economic and retail environment development , certain retailers as well as individual regions of the country will realize differing economic effects.

The Russian retail market had a value of about 13.85 trillion rubles ($558 billion) in 2008, reflecting growth of nearly 28%. However, each of seven federal districts (Siberian, Urals, Northwestern, Central, Volga, Southern, and Far East) exhibits stark contrasts with regards to the current stage of retail markets, competition and thus, their developmental prospects.

Mining the Metropolitan Markets

The most populous region (as well as the smallest), Central Federal District, including Russia’s capital — Moscow — is the largest retail market in the country, yielding retail turnover of €189 billion in 2008 and comprising 34% of the country’s total sales. Interestingly, the Northwestern federal District, including St. Petersburg and Leningrad, did not account for a significant amount of total retail sales in Russia. In fact, less than 10% of the country’s retail turnover originated there, prevailing only over the Far East.
In 2008, the latter generated slightly over €20 billion of retail sales. The visible disparity is created, in part, by the number of people inhabiting each of the regions as well as their purchasing power and variety of choice in retail outlets. Therefore, the Central Federal District stays ahead in terms of retail sales per capita (€5,100), owing to the high purchasing power of its citizens. The Urals follows closely, with €4,890, also exceeding the country’s average. The Urals region’s prosperity may be attributed to the high average wage value in the District, highest among all regions in Russia.

Southern and Urals Catching Up Quick
The regions developing most dynamically in terms of retail business include the Southern Federal District and Urals Federal District. Retail sales in those Districts are estimated to have grown by 34% and 33% in 2008, respectively. The Central region, with its higher base and maturity level, develops lower rates.

Regarding the presence of national retail chains, various Federal Districts exhibit different penetration levels. The majority of nationwide chains either originated or, in the case of foreign retailers, initially invested in the Central District (14 out of the 20 top chains in Russia). Many would later expand into other regions. Yet it is interesting to note that from among the 12 largest foreign retailers which invested in Russia, only one (Rutakesko) did not invest in Moscow first. Very few retailers, however, have managed to expand to every Federal District of Russia. This gives an advantage to a number of local players, which with regards to the size of the country, operate and sometimes even lead their segments on a local/regional basis.

Merger Opportunities Expected
The general economic dynamics currently occurring in Russia is expected to stimulate the activity of mergers and acquisitions in the retail industry throughout the country. The larger players are expected to withstand some economic turbulence, being supported by government initiatives (creating opportunities to acquire loans for financing strategic projects and acquisitions inside Russia) or entering alliances with foreign operators.

One way or another, it is likely that existing players will increase their numbers while foreign entrants will join the Russian market through acquisition of some medium-sized national or regional players. Global retail giants, such as Carrefour and Wal-Mart have already laid claim to their own offices in Russia. The likely presumption dictates that these titans will engage in pursuits for control over some Russian retailers (e.g., Lenta or Sedmoy Kontinent). At the same time, Russian retailers might use the opportunity to expand by taking over local enterprises, which are abundant in remote regions of Russia.

The simple fact remains that the unique catalysts currently operating in the Russian economy and the retail markets in particular have opened the door for Western franchise expansion, bolstered by a number of additional factors.

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It pays to examine the lighter side of Russian culture, that one may glean a sense of the unique life and styles in Russia. For our ‘wordless wednesday’ photo gallery, we’ll touch on some Russian Lifestyle points of interest. Today we’re looking at some popular movie posters in Russian. See if you can tell what they’re advertising! Enjoy!

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Franchise Relations
For franchise systems that are past the start-up phase in their growth cycle and have some experience in managing a franchise system, issues related to relations between the franchise company and its franchisees often emerge as critical to the success of the system.

After all, the strength of any franchised brand is dependent, in large part, on the degree to which the franchise system and franchisees can cooperatively exploit competitive opportunities, gain market share, build the value of the brand and enhance the profitability of operating units, whether franchised or company-owned. A franchise system which is crippled by internal dissension, units that fail to present the franchised concept appropriately or have human and financial resources diverted to dealing with disputes, will probably be at a significant competitive disadvantage, as compared to systems with good relations and not facing those issues.

It’s these hard-nosed business realities that ultimately justify concentration on the skills and resources needed to have good franchise relations, not simply a desire to “feel good” and have pleasant business relationships, as valuable as those may be by themselves.

So, a franchise system wanting to develop or improve good relations with its franchisees will be led to review some of the resources available. These resources provide a wealth of detail on a universe of topics, including such important items as communications with franchisees, the use of surveys by the franchisor or third parties, franchisee advisory councils, dispute resolution procedures, franchisee support staffs and functions, and so forth.

Tools Versus Core Principles
While all of those individual resources are highly useful, they and the structures and procedures they outline are only tools, although admittedly vital ones, in constructing a franchise system that embodies good franchise relations.

As with any tool, the result probably depends less on the quality or nature of the tool used than on the use actually made of it. A franchise company may have a wonderfully structured franchisee advisory council, but if it never presents issues of any significance to it or fails to listen to its concerns, the result may actually be more negative than if it never been organized in the first place.

Tags: Asia, Austria, Britain, Bulgaria, Business, Consultants, Denmark, Eastern Europe, Economy, England, Entrepreneurs, Estonia, Europe, European, Fast Food, Finland, France, Franchise, Franchisee, franchising, Franchisor, Germany, Global, Great Britan, Greece, Holland, Hungary, international, Ireland, Italy, Latvia, Market, Moldova, Money, National, Netherlands, Poland, QSR, Quick Service, Restaurant, Romania, Russia, Scotland, Small Business, Sweden, UK, Ukraine, United Kingdom, World

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The Restaurant Rush in Russia
Russia’s Newest Crush: Fast Food
Here in America, we’ve grown into an established and delightful relationship with our beloved Fast Food Restaurants. But halfway across the world, the growing fast food phenomenon in Russia is wooing a whole new crowd of enthusiasts.

Having endured the most recent harsh economic climate with little reprieve, Russians across the country are welcoming the availability of inexpensive food. Traditionally busy dine-in restaurants around Moscow and other major cities in Russia have noticed the trend. While the latest statistics indicate standard restaurant attendance is down by about 40%, and the average restaurant bill is 20% lower, the lines at counters under the golden arches are growing rapidly.

The reason for the shift towards Russia’s new love affair with fast food is pretty clear. Prices on the menu board at quick service restaurants are simply much lower than those on the fancy menus at standard dining establishments. Demand for more fast food options is rising just as swiftly as the attendance at the existing quick service restaurants.

“Mini Food” Trends Are Building the Bridge
Swiftly becoming one of the hottest new trends in quick service restaurants, “Mini” food items now surfacing en masse here in the U.S. have found their way into restaurants in Russia. The mini-sized offerings, most notably seen in new campaigns by Jack-in-the-Box and McDonald’s have taken the market by storm. As the trend swept into Eastern Europe and Russia, where widespread consumer support for the products mimicked its appeal in the U.S., clear links between our food service markets were pinpointed. While cultural and economic contrasts may create challenges for expanding food franchises in new international markets, we can rest assured that the likable trends we all enjoy are near certainties we can take to the bank, regardless of geographic location.

Answering the Call
The rapid upsurge in demand for QSR’s (Quick Service Restaurants) in Russia remains a delightful sight…especially for those restaurant proprietors and franchise owners who stand to benefit. The simple offering of cheaper food isn’t the only factor creating a fresh viable market for the QSR industry in Russia. Many restaurants have removed expensive dishes from their menus, thereby sacrificing diversity in menu options in an effort to draw more of the frugal-minded consumers. As a result, the fast food merchants not only offer lower prices, but they are also able to maintain a diverse menu with plenty of choices, even catering to health-conscious patrons with some offerings.

Quite succinctly, these events amount to a rich market environment that Franchisors only dream about. The rapidly growing demand for quick, inexpensive food is steadily increasing. Compounding this clear call-to-arms for food franchisors is the additional demand for diverse menu choices and concepts. To completely ignore the obvious ‘green light’ for quick service restaurant franchising in Russia at this point in time would be regrettable.

Whether you’ve considered franchising internationally or not, the time to act is now. Our industry has proven highly recession-resistant with low financial risks, making it a viable venture almost anywhere. Contact us today to learn how to grab this opportunity to globalize your brand, establish fresh new ventures internationally, take your share of the plentiful profits and help the world economy in meeting the extensive consumer demand for quick service restaurants in Russia & Eastern Europe.

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