This month the former Russian franchisee of the international donut brand Krispy Kreme became the last local franchise operator to relaunch a strikingly similar venture after the franchisor terminated the franchise agreement in light of the Russian invasion of Ukraine.
Arkady Novikov was Krispy Kreme’s only Russian franchisee until the brand suspended all deliveries to Russia and then ended the franchise relationship in May 2022. Novikov has now launched “Krunchy Dream” stores in the locations previously operated as Krispy Kreme locations.
The franchisee is not the first to restyle and reopen its branches after Western brands enacted a mass exodus from their business operations in Russia. Starbucks announced in May 2022 that it would completely remove its brand presence in the country, which had already suspended deliveries to Russia and all business activities in the country in March. At the time, it had 130 Russian locations operating under license and said it would pay its nearly 2,000 Russian employees for six months and help them transition to new opportunities outside the coffee chain.
Starbucks, along with some of the other major franchises, had been criticized for not disclosing the withdrawal decision sooner, but those decrying the coffee brand’s slowdown may not have appreciated the nature of its business model and the fact that leaving a franchise or licensing relationship is not a quick and easy process. Following that announcement, Starbucks Russia’s sole licensee, the Kuwati-based Alshaya Group, subsequently sold its business to new owners, Russian rapper Timati and restaurateur Anton Pinskiy, who in turn relaunched the coffeehouse locations as “Stars Coffee.” The new corporate logo appears to bear more than a passing resemblance to the Starbucks logo, and many menu items reportedly have similar names to the original Starbucks offerings.
Upon termination of the license agreement with its Russian partner, Starbucks did not enter into a corporate purchase agreement, as some other franchised brands have done. Fast food giant McDonald’s also confirmed in May that it would withdraw from Russia permanently. The company confirmed that they would like to sell their locations to a local operator and “de-Archenize” their sites, to prevent the new owner from using the McDonald’s name, logo, brand and menu. It was subsequently confirmed that the vast majority of the restaurant locations and McCafe stores had purchase and sale agreements with existing McDonald’s licensee Alexander Govor.
The terms of that agreement allowed Govor to restart operations under a new brand, and the first “Vkusno & Tochka,” which translates to “Yummy, and that’s it,” opened in June 2022. Core menu items apparently continue to look very similar similar to those on the original McDonald’s menu, but with different names, and despite a new logo and packaging, the store interior remains relatively unchanged. Govor himself told Reuters that the new company would like to emulate the popularity of the Big Mac by saying, “The Big Mac is the story of McDonald’s. We will definitely do something similar. We will try to do something even better so that our visitors and guests like this find justice.”
However, a complicating factor in that particular scenario is that Govor has not taken over about 100 stores from franchisees, and some of these locations have former franchisees were reported to continue operating using McDonald’s branding. That is of course something the new owner has no influence on; Govor owns no legal rights to McDonald’s intellectual property, and the original franchisor could take any action in violation of the terms of a termination agreement.
franchisor Yum! Brands who owns a number of fast-casual restaurant names, also went down the sales and purchase route with some of its brands when he pulled out of Russia. Pizza Hut is now owned by Noi-M, affiliated with Russian restaurant group Rosinter and a rebrand is believed to be imminent, while KFC was relaunched last month in Russia under the name “Rostic’s” following a sale to two existing KFC franchisees. Again, under the terms of the deal, the new owners will not be allowed to use any KFC branding – but whether that includes the Colonel’s famous secret recipe of eleven herbs and spices used on KFC chicken remains to be seen!
Terminating a franchise agreement is always a difficult and sensitive process and the Western franchise brands withdrawing from Russia will no doubt have taken into account many additional complicating factors in the surrounding circumstances. It is clear that the big brands will keep their trademarks in Russia, both to try to ensure that confusingly similar names and logos cannot be registered, and presumably also in case they decide to enter the Russian markets at some point in the future. to re-enter. Also for the new and emerging Russian brands, if they have expansion plans in their sights, as both Stars Coffee and Vkusno & Tochka say, they would be wise not to imitate the original brand too much, but instead develop their own to seek identity. .
In the meantime, however, it seems likely that the Russian populace will see even more new names appear in their towns and cities – names that may be remarkably similar to those of times long gone.