Restaurant company Brinker International inks franchise deal to expand into Russia.

Brinker International, Inc. has entered into a development agreement to bring their popular Chili’s Grill & Bar concept to Russia. The first Chili’s will open in November 2010 in Moscow, with 25 total restaurants planned for expansion in the Russian Federation per the terms of the agreement.

John Reale, president of global business development for Brinker International said, “Russia offers vast potential for the Chili’s brand, and we look forward to sharing our unique bold flavors and dining experience with guests throughout the country.”

Brinker International currently owns, operates or franchises 203 international locations in 29 countries and two territories outside the United States. As part of the company’s goal to become the globally dominant casual dining portfolio company, Brinker International plans to have 500 restaurants open outside the United States by 2014.

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American Franchisors Aim at the Markets of Brazil, Central and Eastern Europe

 Such prominent franchisors as McDonald’s and Subway plan to enter the markets with a steadily augmenting portion of middle class customers (including Chinese and Indian markets).

Stagnant economic situations in the USA hamper business development in the country. Therefore, most franchisors choose to expand their businesses abroad. For instance, Curves (a fitness franchise) and Subway (a chain of sandwich restaurants) significantly increased the number of their foreign partners over the last year. The key player in the fast food industry – McDonald’s – also preferred to open new restaurants abroad rather than in the United States. In 2009 only 53 restaurants were opened in US cities and towns while other countries of the world welcomed 286 new restaurants. It’s noteworthy that in 2008 the proportion was equal.

In 2009 American franchisors aim mainly at the markets of Brazil, Central and Eastern Europe. The scope of their interest also includes such countries as India and China with the increasing portion of middle class customers.

Active overseas growth of American franchises is also influenced by the difference in financing structure. As a rule, American companies that sell their trade mark abroad help their foreign partners to acquire the necessary funding or finance them. At the same time their domestic partners have to develop the business based on their own resources or bank loans. That is why the development of franchising networks in the USA naturally slowed down in 2008 with the unfolding of the credit crunch. 

Foreign investors consider partnership with famous American franchisors to be very lucrative as American companies offer a well-known brand and proven business models. “We offer low expenses and very simple operation techniques”, says Subway’s Development Director Don Fertman. “This is the type of business everybody can participate in”. Beginning from January 2008 Subway has opened 1,432 overseas and 1,230 domestic restaurants. During the last five years the chain doubled its presence in the foreign countries and now has 8,817 restaurants outside the USA.   

The development strategy of Curves is similar to that of Subway. Beginning from this February 612 new fitness clubs have been opened abroad and only 19 clubs in the USA. Curves’ major market is Japan where the company has 744 fitness clubs opened. In May 2009 Curves came to China and plans to enter the Indian market this autumn. “With our concept of fitness clubs exclusively for women we bring something truly foreign to these markets”, points out the company’s CEO Jim Johnson. This concept can be especially successful in Muslim countries where due to religious customs men and women traditionally have separate rooms for any public activity.     

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Russia’s Financial Forecast: 2010-2011

Promising Predictions

Initial analytical forecasts show that the Russian consumer market is rather powerful, and in 2011 it’ll be the largest one in Europe. According to the latest data, by 2010-2011 Russia will become the largest European customer base. Already this year, about 85 million Russians are expected to become active buyers. This figure will increase by 5 million within the subsequent year.

The Ministry of Economic Development and Trade anticipates the population real income growth at 8-10 % a year for the next 3 years. The data emphasizes high income growth rates and population changes consequently. For the next 4 years,  consumer goods sales will increase 20-30 % yearly. These figures indicate well-established and stable middle-class economic demographic formations in Russia.

Understanding the Structure

Russia is divided into 7 federal districts. The Central (Moscow as the center), North-West (St.Petersburg), Volga federal district (Nizhniy Novgorod), Ural district (Yekaterinburg), Siberian (Novosibirsk), Far Eastern (Vladivostok) and finally, Southern (Rostov-on-Don). Centers of the federal districts and large regions (Tatarstan, Bashkortostan, Krasnoyarsk and Khabarovsk territories, Tyumen region) are more economically developed and investment-attractive.

The first Russian top five redions are Moscow, Moscow region, Kazan, Yekaterinburg, St. Petersburg. Khanty-Mansi Autonomous Area stands separately (with Khanty-Mansiysk as the capital). In terms of geography, it’s part of the Tyumen region, but considering living standard and per capita income, this small district with 1.5 million people (1% of the total Russian population) enjoys 2nd place persistently, going after Moscow.

According to average monthly per capita income, its rate can vary from 7 to 9 times in different regions. Primary high-production regions benefit most. The income rate in the Nenets Autonomous area is the highest. Caucasus republics have the lowest one.

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