It may not be chic, but if I were to open a business in Russia, it’d be a fast-food chain. In all my travels through Russia and Ukraine, I have never, ever encountered a slow McDonalds. There are always, always lines. The same goes for the Wendy’s I’ve seen, the Subway (Sandwich Shops) and the Sbarro’s Pizza. All these places are clearly making money hand over fist.
Why? Because thanks to the trickle-down of their oil-economy, Russia has a growing middle class with money to burn, and they yearn for western-style fast food. That, plus Russian cities are finally developing the infrastructure necessary for these chains to do well. Obviously the modern shopping mall plays a huge roll. Shopping malls have food courts, and that’s where these chains dominate. But also better roads lead to drive-thrus, and more sophisticated delivery hubs allow them to keep their stores stocked.
Want numbers? As of 2013 there are approximately 300 McDonalds operating in Russia, and probably another fifty in Ukraine. Subway has about 200 stores. Wendy’s is planning to open about 200 shops in the coming years. And oh the pizza joints! Papa Johns, Dominos, Sbarros…they are all expanding like crazy.
Although the average household income is many times higher in the U.S. than in Russia, the average Russian person nevertheless has a relatively large amount of spending money. This is because Russians essentially have no debt. They own their apartment outright…no mortgage. Medicine is basically free. They don’t have credit cards and thus have no consumer debt. This high demand for fast food and its relative scarcity makes these chains highly profitable. Here are a few more numbers to chew on: The average check at a fast-food store in Russia, according to Wendy’s — is nearly $9. Compare that to about $6.50 in the U.S. A large Papa John’s pizza in the U.S. that costs, for example, $14 would cost over $20 in Moscow.
Please bear in mind, this is just my business-self talking. That is, from a business point of view, a fast food restaurant is a great idea. Of course, from a health-perspective, it’s probably not the best thing to encourage a society to consume increasing quantities of fat and salt-laden fast food. But that’s a whole different issue. The point of this article is simply this: If you have the expertise (and the capital) to open a western-style chain here in Russia or Ukraine, you’d likely do very, very well. (And if you are thinking of doing business in Russia or Ukraine, feel free to write me or leave a comment. I’m happy to offer whatever advice you might need.