What is in this article?:
- Rosinter founder maintains optimism despite Crimea crisis
- Identifying risk
The Russian franchise operator can resume growth once tensions ease, according to founder Rostislav Ordovsky-Tanaevsky Blanco.
Rostislav Ordovsky-Tanaevsky Blanco, founder and chairman of Rosinter Restaurants Holding
The closure of three McDonald’s restaurants in Crimea Friday further highlighted uncertainty about a possible trade rift between the United States and Russia that has been brewing since the latter’s standoff with Ukraine.
Restaurant executives in the United States have been monitoring their interests in Russia and Ukraine amid those tensions since February, when protests in Kiev led to the ouster of Ukrainian President Viktor Yanukovych and ultimately to Russia annexing Crimea from Ukraine. Western brands’ primary course of action in the conflict has been to rely heavily on their native Russian partners entrusted with franchised locations, executives said.
One of Russia’s largest franchise operators, Rosinter Restaurants Holding, has been fighting against low-double-digit declines in same-store sales throughout 2014, even before the Crimea crisis, said the company’s founder and chairman, Rostislav Ordovsky-Tanaevsky Blanco. The conflict between Russia and Ukraine has not helped, he said, but a slowdown in those two economies already had set some of Rosinter’s plans into action.
“We had seen things [in Russia] stagnating already, not only at Rosinter but also in the foodservice sector and retail sector, which had seen a drop in consumption,” Ordovsky said from Moscow during a phone interview with Nation’s Restaurant News. “All in all, 2014 will be a difficult year regardless of Crimea. It adds a bit of nervousness to the situation, but the 10-percent devaluation [of the ruble] makes an impact and brings inflation on the goods we buy. There also will be a slow balancing in the correction of the real estate market.”
Rosinter operates 383 restaurants in 42 cities throughout Russia, Ukraine and eight other former Soviet Republics. In addition to its proprietary Russian brands, it operates 33 TGI Fridays units and 28 Costa Coffee locations, and it is the licensee for McDonald’s locations slated for Russian transportation hubs. The company is not involved in the closed McDonald’s restaurants in Crimea.
Ordovsky spoke with NRN about why he maintains that Rosinter can resume growth once tensions between the United States and Russia ease and the economy in Russia regains its footing.
Western executives have said consumer confidence is much worse in Ukraine right now than in Russia. Is that how it appears to you?
Let me start with a little perspective. Ukraine and all these countries of the former Soviet Union are in reality only 20 to 25 years of age. In a very short period of time, they have gone through a lot of stages of evolution that usually took a whole century in the West.
In Ukraine, it is important to note that, for the last 15 years, there has been a very lousy government. It’s gone from [President Viktor] Yushchenko, a very pro-Western government, to [President Viktor] Yanukovych, a very pro-Russian government. When Yanukovych won his election [in 2010], he also built a lousy and corrupt government.
There is nervousness in Kiev, of course, but not because of Crimea, but because the instability of who will be the next president. There is an extremist, rightist force trying to influence the transition government in Ukraine. That is what has produced this lack of confidence and drop in sales.
The confidence in the political situation in Ukraine has been deteriorating consistently for the past 15 years. The lost confidence hit a peak when the street demonstrations started [in February]. People were encouraged and thought finally that the voice of the people would be heard, but then we know what happened, and unfortunately we have what we have today.
Will that affect U.S. brands? I don’t think so. On the contrary, in a crisis, people trade down, so the people who would benefit would be solid QSR operators.