(Continued from page 1)

How about the effect of the Crimea conflict on your consumers in Russia?

My personal opinion is that of course the Crimea factor brings some nervousness to the Russian people, but also joy, correcting a mistake made by [former Soviet leader Nikita] Khrushchev in the 1950s [transferring the territory from Russia to Ukraine]. There is a lot of happiness for regaining Crimea, but also some sadness because it came at the cost of damaging the relationship with Ukraine.

Russia had been going into a recession already. We started feeling that the consumer was a little more concerned and careful about expenses in January, before the Winter Olympics and before any idea that this Crimea thing would happen. The 10-percent devaluation of the ruble will have an effect, because Russia depends a lot on imports for the goods it consumes.

But what risks are there for you or for Western restaurant brands if tensions do escalate between Russia and the United States?

People are a little worried about whether this will cause Russia’s relationship with the West to deteriorate, but I don’t believe it will. [Russian President Vladimir] Putin, President Obama and Europe all need to save face. I hope that, unless somebody tries to escalate the situation, this all might calm down in a few months.

Assuming things calm down, the U.S. brands here are very well received and respected. … At this stage, this clash will have no effect on Russian brands. But if people react against Western brands, and if it escalates into a full-fledged conflict, everyone will lose. … If [Western governments] decide to attack the ruble or stop importing Russian oil, I think you can kiss some of your money goodbye [through the freezing of royalty income].

Western franchisors have said their main contingency is to work closely with their Russian partners like you. What are your contingencies in this uncertain climate?

We have had an economic issue before we had a political issue this year. Contingencies are difficult to put together for a war, but I’m not putting any together for such a conflict.

This is my fifth crisis. I left Venezuela in the crisis of 1984, and I’ve been living in Russia through major crises, such as in 1998 and 2008. Now we again have a localized crisis of the emerging markets, which grew too much, and the economy became a bit too hot. Brazil is also going through this, as is India. We are doing a very thorough analysis of our support center and will reduce staff there a little bit, as well as optimize all our procedures and processes.

In the first quarter, the real estate market in Russia had a little correction, but now the real correction will take place.

You sound optimistic for Western brands once Russia’s Crimea standoff and recession get resolved.

The restaurant industry coming from the United States is definitely the most developed and the best prepared in terms of systems, procedures and brands for the international market. We have learned a lot from the TGI Fridays team throughout 17 years of cooperation. The magnitude of knowledge and experience is something your country should be proud of.

International business is difficult, especially for casual dining, but Western quick-service brands have most of the international market. Everybody has something to say about how the U.S. is guilty for everything bad in the world, but the reality is you have a great export in your restaurant brands. It has brought a lot of success to the Russian industry.

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN