The Russian franchising sector significantly outpaces the country's economy. While the GDP grew by only 2.3% in 2018, franchising experienced a nearly 20% growth. The number of franchised outlets increased by 20,000 in a year, reaching a total of 70,000. Currently, there are around 2,000 franchises in Russia, nearly 500 more than the previous year. "Over the past decade, the total number of franchises registered with Rospatent has grown more than tenfold. The growth is orders of magnitude higher than that of the entire Russian economy," notes Boris Nuraliev, the founder of "1C," the largest franchisor in Russia.
What is this connected with? 'As the experience of developing countries, including Russia, shows, the growth of franchising occurs during crisis years. Entrepreneurs are closing their own unprofitable businesses and switching to partnerships,' believes Yuri Mikhaylichenko, Vice President of the Russian Franchising Association (RAF). The number of employed individuals is also increasing: on average, 15 people work in one franchised point, thus franchises provide jobs for over 1 million Russians.
One of the largest segments represented in franchising is the food service industry. According to estimates from the Russian Franchise Association (RAF), it accounts for about 33% of all franchises. In Forbes' ranking (formed, like last year, into three groups based on investment volume), cafes and restaurants are only present in the "upper" group, requiring investments ranging from 5 million to 25 million rubles. The economic situation for both Russian veterans like "Shokoladnitsa" and "IL Patio" (part of "Rosinter") and Western newcomers like Cofix is very similar: the average profitability of cafes is 10–15%, and the real payback period is around two years. Against the backdrop of decreasing purchasing power, interest in such franchises is decreasing, although there are exceptions. For example, "Dodo Pizza" opened 153 new pizzerias in one year. Meanwhile, "Shokoladnitsa," which opened only 32 franchises and closed 12, is currently adjusting its franchising model to attract new partners.
Many companies strive to expand their range of formats by offering more compact and budget-friendly options to become more appealing to potential buyers. For example, Burger Club, which has returned to the ratings, offers two options: a franchise for a full-fledged restaurant or a spot in the food court of a shopping center, the opening of which is 1 million rubles cheaper. Furniture companies like Mr.Doors, "Maria," and "Ascona" have reduced investments in opening partner stores, allowing them to significantly expand their networks. "Ascona" has even moved from the first investment group to the second with an average investment size of 1-5 million rubles.
A vivid trend is the boom of educational and developmental franchises. In 2019, the leaders in all rating groups were projects targeting children and teenagers. There are seven "children's" franchises in the list. The increase in birth rates in Russia naturally heightened entrepreneurial interest in educational projects. Sales of franchises for private schools, preschools, and sports sections started to rise. In this business, the most expensive venture is opening a bilingual preschool like Sun School: substantial investments are required for qualified teachers and proprietary teaching methods, totaling 8-10.5 million rubles at the start. The Speed Reading and IQ Development School, IQ007, will require investments of up to 3 million rubles.
Child sports schools, franchises that remain popular, are among the most budget-friendly. On average, an investment of 500,000 rubles is needed to open one school, and it pays off within six months. Four franchises for opening sports schools, requiring the smallest investments, have entered the lower group of the rating, totaling 1,300 points across the country.
Overall, according to RAF estimates, 'child' franchising already occupies a significant share of the market—around 3%, and it is expected to continue growing.
Source: Forbes.ru