— Lorenzo, how is it that a 28-year old from Italy has managed to establish themselves here in Moscow?
Over the last six months, the catering segment in Moscow has contracted by 10%. This is hardly unsurprising: average wages markedly decreased during the crisis, as a result of which, demand also dropped significantly. Added to which, the cost of supplies for those in the business increased substantially. Very few operating in this segment will be feeling as if they are doing well at the moment.
But, compared with western countries, there are still far fewer places serving food in the Russian capital than are needed. Hence, the conditions for growth are there.
As far as the costs to enter this market are concerned, the difference in outlay is great, depending on the project: costs for a not so large fast food outlet are between 1 and 5m RUB. Opening a small coffee shop requires an investment of between 6 and 20m roubles. Then, a high-class bistro with parking will cost the investor over 100m roubles.
Regarding recoupment periods, here it is difficult to offer a single estimate. Generally, with franchises, 2–3 years is quite realistic. However, if the economic situation doesn’t improve, and sales fall even further, then the recoupment period could be 2–3 times longer, if not rendering the business completely unprofitable...
It is difficult to predict the future development of the catering market in Russia and in Moscow: a lot still depends on the state of the economy. In all likelihood, when the crisis begins to abate, growth rates will re-establish themselves.
The format of Lorenzo Getti’s business is without doubt very interesting in terms of its ergonomics and the facilities for those who simply want to enjoy a cup of coffee either on or off the premises. But, at the same time, when combining different forms of business, one must rigorously heed the requirements as set out by the laws and bylaws of the RF for each of them.
To set up any business in Russia, it is necessary initially to register with the Tax Inspectorate as either a sole trader (IP) or a legal entity (company) with a defined form of ownership. For example, as a limited liability company (ООО). These business legal structures differ both in the number of permissible founders, as well as in the degree of accountability towards third parties, in what can be done with funds, as well as the procedure for carrying out the compulsory financial and other reporting.
Also, in order to engage in retail trade it is necessary by Russian law to have suitable premises which meet the specified requirements, and a registered cash till. One must also obtain a pair of scales, set up a standard “Consumer Corner”, as well as acquiring permits from the Fire Safety Authority, the Russian Consumer Rights Protection Service (Health and Safety) and the Bureau of Technical Inventory (if alterations to the property are required). And, of course, contracts with suppliers. A kitchen will require a separate Health and Safety (SES) inspection. If you are planning to sell alcohol at your establishment, then you will need a special licence and to be defined as a limited liability company. Also, all employees working with food will need their health records.
I would advise all potential investors to clarify such nuances with a lawyer with a knowledge of the Russian environment in this area.