Experts: WTO Entry To Boost Franchising

By Irina Titova

The St. Petersburg Times

Published: September 12, 2012 (Issue # 1726)

Russia’s entry into the World Trade Organization will have a positive impact on the further development of franchising in the country, experts said Thursday at a press conference.

WTO membership will attract new business players into the country, including new brands willing to operate as a franchise, Tatyana Bogomyakova, business development consultant for Subway fast food chain in Russia, said at the press conference, which was devoted to franchising in Russia under the conditions of the country’s entry into the WTO.

“At the same time, many new foreign banks will enter the Russian market, and they will surely be willing to help franchisers financially, as this is currently being done through Sberbank’s ‘Business Start’ loan program,” she said.

“We also expect the decrease of customs duties on the import of foreign equipment, and that will accordingly reduce business expenses,” she said.

Bogomyakova said Subway, a franchising chain, is successfully developing under this scheme in Russia.

“The company started with its first restaurant in St. Petersburg and now it has 437 restaurants in 70 cities of the country,” she said.

Yana Borovskaya, deputy director of sales for small businesses at Sberbank Northwest, said the bank’s ‘Business Start’ pilot program is designed to help entrepreneurs who wish to open their own franchise. The program was launched in December last year in St. Petersburg and Murmansk. Currently the program is expanding to Pskov and Novgorod, and will later be introduced to other cities of Russia’s northwest.

“Small businesses need support, and our program aims to help them,” said Borovskaya. “Under this program, entrepreneurs who start their own businesses can get loans for up to 80 percent of the business expenses for 42 months at 17.5 to 18 percent interest,” Borovskaya said.

Igor Snegiryov, director of foreign economic affairs at the Leningrad Oblast Chamber of Trade and Industry, said the chamber had opened a franchising information center to help entrepreneurs go about setting up a franchise in the right way.

Sergei Tsybukov of the St. Petersburg Chamber of Trade and Industry warned that people who want to open a franchise business should calculate everything thoroughly.

“Businessmen should bear in mind that those who invite you to work under a franchise scheme will put all the expenses on your shoulders. Franchising alone won’t allow you to make a lot of profit,” he said.

Tsybukov also said that Russia’s entry into the WTO would bring new challenges for national producers.

“We must understand that in a while, foreign goods will flood into Russia, and euro and dollar exchange rates will increase. Therefore only national producers who have already developed their business well will be able to compete successfully in that situation,” he said.

Participants of the press conference said they expected the National Franchising Festival due to be held in the city this week to boost the development of franchising in Russia’s northwest.

Mikhail Granik, commercial director of Northwest Tele2 telecommunications company, which also offers franchising opportunities to businesses, said the company saw the festival as a “convenient ground on which to attract B2B partners.”

Bogomyakova said the Franchising Festival would be “the first event of the kind in the city to offer a whole range of opportunities for people to open their own business.”

“Franchising is the best option to start one’s own business and find reliable partners,” said Yevgeny Kuznetsov, director of Russkii Prostor, which is organizing the festival.

“And this festival will give another impulse for the development of franchising in Russia’s northwest,” Kuznetsov said.