American business missionaries bring seven franchises to Kazan

On advice of Jon Huntsman

James Golsen, the Senior Commercial Officer for the U.S. Embassy, aimed at restoring business relations between American and Tatarstan businesses, has visited Kazan. Golsen has travelled outside Moscow to study the situation in the regions for the first time. In choosing the place of acquaintance, he, by his own admission, followed the advice of his former chief — U.S. Ambassador Jon Huntsman, who finished his work in Russia in October.

“He told me that if I wanted to achieve results — I should go to Kazan. Everything that I have seen this time confirms that this is the city where American business should go,” solemnly concluded the senior commercial officer.

Together with the Chamber of Commerce and Industry of the Republic of Tatarstan, the Commercial Service of the U.S. Embassy organized the franchising seminar Franchising Together in Kazan. Golsen said that he did not come alone: he brought representatives of seven well-known U.S. companies ready to develop in Tatarstan on franchise terms. In his opinion, this is the fastest way to establish business relations.

“It's the first time I've travelled outside Moscow, and there's not much time, so we need to concentrate on the areas where there are maximum opportunities,” said James Golsen, referring to franchises as ready platforms for building relationships.

According to him, their peculiarity is that when U.S. companies open an enterprise in Russia, they do not bring staff with them but train local personnel. Answering the question about the impact of the sanctions, he noted that 90% of businesses have not been affected by the restrictive policies.

UFC GYM franchise seeking a partner in Kazan

There are new franchises for Kazan among the ones brought from the U.S. It is the brand of professional fitness clubs Little Gym and UFC GYM, operating since 2009, and now the chain has more than 150 institutions in 15 countries. The clubs have become the first subsidiary brand for the largest international organizer of MMA fighting — UFC. The owner of this brand in Russia is the Moscow company Sportforum. According to its CEO Igor Ryzhov, in April, a contract was signed to use the UFC GYM brand in our country for 10 years. According to it, Ryzhov expects to open 55 clubs across the country. In the near future, they will appear in Nizhny Novgorod, Tyumen, St. Petersburg. However, they do not have partners in Kazan yet. According to Ryzhov, minimum investments are required — from $20,000 to $50,000, and the payback is achieved in two or three years.

The second brand, SUBWAY, is well-known but insufficiently developed in Tatarstan. The fast-food chain also has a small entry threshold and a quick payback. The third company — Baskin Robbins Concept Presentation, under the brand of which in Russia there operates the network of branded cafes, the world leader in premium ice cream varieties, is also interested in expanding its network in Kazan and the republic. During the meeting, representatives of American companies noted that the Little Gym and UFC Gym franchises are not currently represented in Tatarstan and the companies are interested in finding partners as soon as possible. According to the National Franchisee Association, there are currently more than 2,600 franchises in Russia, 35% of the franchises are foreign, 12% of the franchises represented are from the United States.

“This is not a single visit but the beginning of a series of follow-up events,” James Golsen promised. “An important part of my work is to establish ties at the interregional level so that representatives of American businesses enter the regions of Russia. Next time, we will bring representatives of 20 companies.”

According to him, it will happen not earlier than in 10 months. The journalists asked the senior commercial officer whether the Americans have an understanding of consumer tastes in Tatarstan, whether the franchises “will be able to acclimate to our environment”. “Not right now,” James Golsen said honestly. “But we are studying the consumer trends across Russia in detail and perfectly understand that there are different preferences in the regions. However, the task of the embassy is to provide maximum information to simplify the decision-making process.”

The presented franchises have an average payback period of investments, which are popular, Aisylu Garipova, the director of the international platform to seek and attract investments Business Platform, estimated their potential. In her opinion, the franchise market grows by 15% a year, and those with relatively simple business models, quick payback (up to 2 years) and investments of up to $50,000 are in demand.

“In general, the consumer market of Tatarstan is very active, and the presented segments are in a highly competitive environment. For successful implementation, it is necessary to give to potential clients a unique trade offer and to show the maximum loyalty to their demands,” she considers.

Can difficult political relationships between the United States and Russia affect customer loyalty to U.S. brands? In her opinion, first of all, profitability will be influenced by the comprehending of customers' needs and demand in the market, and political factors will not be a guide for the target audience: “such criteria as brand trust, meeting the needs, loyal attitude of a company to consumers will come to the fore”.

U.S. Chamber of Commerce thinking about Kazan

In September, it was reported that the U.S. Chamber of Commerce and Industry is going to open a representative office in Kazan. “When will this happen?” they asked Mr Golsen, but he did not give an exact answer: “Yes, I know that they are very interested in indicating their presence here. But I do not know how the project is progressing.”

Regarding the withdrawal of the flagship of the U.S. automotive industry from Russia — Ford, Senior Commercial Officer for U.S. Embassy James Golsen said that this was not the result of regional circumstances but the consequence of global trends. “The industry goes through different cycles of development around the world. It is very bad when a company leaves or minimizes its participation in the market. This event is connected with global trends, not with any regional peculiarities. If you look in general, Russia in terms of U.S. investments remains the first. Colleagues from the Investment Development Agency reported that the U.S. is one of the key investors in Tatarstan. Despite that Ford has left, American Cummins continues its work, and they are doing very well,” he concluded.