February 25, 2021

Russia Becomes a Magnet for U.S. Fast-Food Chains

Mr. Wynne is the top franchisee in Russia for the Papa John’s Pizza chain. His competitors include the American chains Sbarro and Domino’s, and a Russian upstart, Pizza Fabrika. But so far, compared with the largely saturated United States market for fast food, Mr. Wynne says he is finding plenty of demand.

“I could succeed in my sleep there is so much opportunity here,” said Mr. Wynne, who has just opened his 25th Papa John’s outlet in Russia, doubling the number in the last year.

American fast food has been going global for years, of course. And China and India continue to be big expansion markets. But lately, the industry is finding a growing appetite for its fare in Russia — not only of pizza, but for Burger King’s Whoppers, Cinnabon’s Classic Rolls and Subway’s barbecue pulled pork sandwiches, among others.

“As consumers have more disposable income they will spend it on fast food,” Jack Russo, a fast-food industry analyst at Edward Jones, said in a telephone interview. He compares the market here to the United States half a century ago.

For years, McDonald’s, which opened its first restaurant on Pushkin Square in 1990 and generated gigantic lines, was the only American fast-food chain in Russia. McDonald’s now operates 279 restaurants in Russia.

But other chains are flocking in. Burger King has opened 22 restaurants, mostly in mall food courts, in two years. Carl’s Jr. has 17 restaurants in St. Petersburg and Novosibirsk. Wendy’s has opened two restaurants including a flagship on Arbat Street in Moscow, and plans 180 throughout Russia by 2020.

The Subway sandwich chain has opened about 200 shops in Russia, working through several franchisees. Yum Brands, which owns KFC, Pizza Hut and Taco Bell, operates a co-branded chicken restaurant chain in Russia, called Rostik’s-KFC, and Il Patio in the Italian food segment. Yum now has about 350 restaurants in Russia.

Paving the way has been Russia’s development in many cities of the modern infrastructure needed for fast food to flourish — including malls with food courts, highways with drive-through locations, and specialty suppliers of frozen foods and packaging.

Moreover, Russian consumers are increasingly affluent, partly because of the trickle down from the nation’s lucrative oil exports. And though they still trail far behind the average household income of Americans — $43,539 in the United States versus $7,276 here — Russian consumers tend to have a large portion of their money for discretionary spending.

They are unburdened by the hangover of consumer debt that has curbed American purchasing power. Nor do Russians have high medical bills because the health care system, if flawed, is largely socialized. The income tax is a flat 13 percent. And a majority of Russians own property mortgage-free, as a legacy of the mass privatization of apartments in the 1990s.

As a result, the fast-food chains find they can charge higher prices in Russia than in America. The average check at a Russian fast-food outlet — $8.92 according to research by a Wendy’s franchisee here — is significantly higher than the United States average of $6.50.

A large “the works” pizza at Papa John’s in the company’s home base of Louisville, Ky., for example, costs $14, compared with $21.62 for the same pizza in Moscow.

Ready buyers include Valery V. Mamayev, a man who reached his 30s without ever ordering a pizza. But he has been a steady Papa John’s customer since a shop opened in the spring in his neighborhood, the Maryino district, an hour’s drive from central Moscow. Maryino is a cityscape of concrete apartment blocks, tangled skeins of traffic-clogged thoroughfares and, these days, an ever growing array of food chain outlets.

On a recent Sunday, Mr. Mamayev padded into the hallway of his apartment building in boxer shorts to take delivery of a pie topped with chorizo, salami, ham, Italian sausage and pepperoni.

Article source: http://www.nytimes.com/2011/08/04/business/global/russia-becomes-a-magnet-for-american-fast-food-chains.html?partner=rss&emc=rss

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