BUYBRAND 2010

8th international franchising and other business possibilities exhibition.

September 21-23, Moscow, Expocentr on Krasnaya Presny

THE PROSPECTS OF FRANCHISING IN RUSSIA

Development of franchising in Russia, for a variety of reasons, goes distinctly slowly than in the Western countries.  However, its perspectives in Russia have long remained strong, making the current state of affairs an unusual one. The  opportunities  for  effective  development, in  Russian  circumstances,  of  the franchising model  are  confirmed  by a significant number of  Western companies operating here under that model, with thousands of local retail outlets.

Franchising in Russia is mainly dominated by companies working in food and restaurant business, as well retailing.  But   there  is  every  reason  to  expect   that developments  in  other  areas  of  the  Russian  economy will  follow,  as  has been shown in the experience of  Western  (and not only Western) countries. If  so  far  it has   been   on  a  small   scale,   the   question  will   be  the  appearance  of   major international   companies    working  on   the  franchising  model.   And now is an objectively strong moment for their appearance.

There are many strong arguments for that to happen.

• The stability  of  the  economical and political situation in Russia at the end of  the  new  decade  is  significantly  higher than  the  state  that  was here in the 1990s. Contemporary   Russia  is  no  more  unstable,   for  business   purposes, than   the  majority  of  European  countries. Level  of  Russian law, on the economic front, in general meet fully all international criteria.
• The global economic crisis has had effect on the Russian economy, with many small  businesses  closing.  As  a  result,  a whole space in the economic sector has  been  vacated.  A shortage in goods and services in these sectors can be felt now, when effects of the crisis in Russia are far from over.
• After a wave of bankruptcies of small businesses, working independently and not  on  the franchising model,  as  a result of  the  financial  crisis,  the Russian business  community,  and  those  who aspire to enter it, will likely reach their own conclusions. The great majority of small businesses working in Russia on the  franchising  model,  have  managed  to  keep  their  place  in  the  market, regardless  of  the  economic  crisis.  Such  a verdict is  supported by the long-established  Western  practice  that  franchising  is  an  ideal  model  for   small business   development.  Many  Russian  businessmen,  who  were  unable  to develop  their own small business models  independently, have already made choice  for a franchising model. The market and small business, is waiting for investors working on a franchising model.
• The  first  years  of  the  franchising  development  in  Russia  showed  that the development  of  the  model  was partly hindered by some inertia on the part of  Russian business  people,  and  their  relative  ignorance  of  the   particular model  that franchising  represents.  Today  the  Russian  business community has  a  full  idea  of  what  franchising  offers.  And  they are ready to exploit its opportunities.

Some foreign businesses which work in the franchising market are sometimes put off by certain faults in Russian laws that regulate that sphere of business.

The relationship  between  franchiser and franchisee is regulated by the law titled “Agreement  on  Commercial  Concessions”,  which  does  not  fully   represent  the specific  factors  in  the  business, namely  the model of franchising. However, such a regulations  do not present practical  difficulties for the two sides involved in such
commercial relationships. The  Russian  Franchising  Association  has  been determinedly, and for some time, lobbying for changes in this  part of Russian law, to bring it into conformance with the real state of the franchising business in Russia.