If 10–15 years ago, the Russian capital’s consumer had only Italian and Japanese restaurants as an alternative to Russian cuisine, then now, the choice is very much wider. Middle Eastern, Korean restaurants, steak houses, khinkali (Georgian dumplings) places – what don’t you come across in the Moscow of 2017! The desire to try something new for Muscovites is in their blood, and the swarms of tourists also enjoy trying out new ventures in the centre of the city. The coffee boom is still in full swing, and completely unknown brands are biting off their share of the market amongst the long-term residents. Pedestrian areas in the city centre are retaking the roadways, allowing restaurateurs to make better use of not only the interiors of their establishments, but also the open spaces in front of them.
Is it easy to find good premises, and how much could they cost?
The rental market is at a stage of constant renewal. But rest assured that if there is a metro station and offices within walking distance of your establishment, then it will be in demand from Monday to Friday at the very least. And if your premises are located in the historical centre, next to places of architectural interest and public venues (theatres, museums etc.), there will be customers around all of the time!
Certain streets in the historical part of the city – the self-same Myasnitskaya Street or Kuznetsky Most – form trade corridors with their dozens of establishments of every conceivable shape and size. Rent on the most successful streets costs from 40–80,000 roubles per metre per year. There are rents that are a little higher. There is a problem finding premises smaller than 100 sq. m. Takings for a successful restaurant on such a street start at 400,000 roubles per sq. m. per annum. If we are talking about international operators, then in certain cases takings can even exceed 800,000 roubles per sq. m. per annum. The proportion of expenditure that goes on rent is usually 10–12% or more.
Premises are usually leased to private individuals, however a certain number belong to the city and are let via auction. Beware of the agreed amount of electricity consumption for rented premises. If they were previously let to a restaurant or café, then in all probability there will be sufficient electricity – for kitchen equipment, and for ventilation, and for lighting. But if the premises were previously used for some other purpose, then acquiring the additional kilowatts of energy may turn out to be an insoluble problem. Hence it is recommended to work through such issues before signing a rental agreement.
It is sensible to sign a 3 to 5-year rental contract, virtually all owners have already moved over to rouble-based contracts with an annual increment in the rental rate of between 5–10%. A rental contract longer than eleven months is recorded at Rosreestr (State Registration Service). This means that both the lessor and the lessee are protected by the agreement. Yet, an eleven-month lease can be somewhat risky as the owner, once the period of such a lease has expired, can simply double the rent, and the law will be on his side.
Is taking premises on the most expensive street really necessary?
If you are opening premises counting on “spur-of-the-moment” trade, then you should first have an original idea and quality service. After all, an impeccable reputation can serve as an alternative to a garish sign and shop-front on a busy road. I recently popped in to Delicatessen, one of the best gastro-pubs in Moscow with a constantly changing menu: a place you won’t find at the intersection of any highstreets and footpaths. The place was full on a Sunday, and all thanks to the good chefs and barmen, and the cosy atmosphere. Does the city need such places? Yes, for sure, after all the spoiled Moscow consumer is tired of clichéd concepts and the same old menus, and demands an individual approach towards him.
It is the same situation with coffee houses. Pleasingly still breaking through the preponderance of chain cafes are individual, as yet unheralded establishments with a friendly atmosphere and marvellous deserts. Deserts in Moscow are their own unique niche. Cheesecakes, handmade confections, and more besides, are a plethora of new niches in themselves which can also, in a matter of just a few days, give your establishment the reputation of being a unique, better-than-the-average, place, with its original array of choices. In Moscow, there can be snow for three months of the year, and both Muscovites and tourists, of an evening and at the weekend, love to get out of the cold by dropping in to a coffee house and trying something sweet.
Rusland SP is an investment and development consultancy company active in residential, hotel, office and retail property segments in the RF and Europe. The company provides services in creating investment portfolios, carrying out town-planning and financial risk assessments, and executes highly specialized forms of town-planning and project consultancy on the Russian and European property markets. For private clients of Rusland SP there are also family office services available which provide assistance in investing in key European markets. The company has two Russian offices, one in Moscow and one in St. Petersburg, and since 2016, two representative offices in Europe – in Germany (Cologne) and Slovenia (Ljubljana). All Rusland SP experts have many years of successful experience gained through continuous professional activity on the property market.
However, Russian service is still something of a stranger to “friendly business” – many fast-food players joke that all Russian food places learned to smile from McDonald’s. Hence an original format would be where the patron finds himself in a “family” atmosphere where families, with children, as well as students and other kinds of customers are met with enthusiasm.
A comparable situation exists with pizzerias. First, quality pizza is in demand not only amongst students (in fashionable restaurants it can cost 12–15 dollars and more), but by office clerks, too. Secondly, if you go on the most popular pizza delivery site, you will see from the photographs that in Moscow the vast majority of chefs still produce what can only be described as a pale imitation.
Managed to set up a trade route for pizza ingredients from Italy? Excellent! In Moscow, (just as in St. Petersburg) it is becoming the trend to acquire food for the home straight from the restaurant. There is a whole group of consumers who order groceries from the very same restaurants they eat in. Of course, there are still limits in place in Russia on supplies of certain foods from particular countries (the list of foods prohibited by the sanctions is updated regularly), however it is possible to find local, and very interesting equivalents, which are of virtually the same quality as the original.
One should also bear in mind that the most successful Russian chefs consider it their duty and a homage to global restaurant trends to work exclusively with local ingredients.
Work carried out by staff in the catering business requires the observation of specific rules. Possession of a hygiene book is obligatory. In order to simplify the staff recruitment process, it is possible to acquire people through the personal recommendations of friends or to turn to specialized recruitment agencies.
How is the granting of an alcohol licence regulated?
For certain establishments (those next to schools, kindergartens, sports facilities) obtaining a licence is technically impossible. In practice, you can be granted an alcohol licence in less than a month by spending a little over a thousand euros, and some of your own time. Or you can turn to a law firm which, for an extra one-two thousand euros, can save you some time. An obligatory requirement for an alcohol licence is that the area of the rented premises should be no smaller than 50 sq. m.
The author of this article is a Managing Partner at Rusland SP. Previously worked as Associate Partner at the British firm King Sturge. Received an education in banking in St. Petersburg, specializing in securities. Has been working on the Moscow property market for 15 years, and advises the largest global and Russian retailers, as well as banks and development companies. Periodically delivers masterclasses and advanced lectures on property investments for Russian and foreign investors. In his spare time enjoys classical music, modern and classical painting, and sculpture. Is keenly studying urban planning, playing an active part in landmark development projects in Moscow and other regions of Russia.
Reputation above all else
And so, you have rented your premises, carried out the refurbishments, had the equipment delivered, put the sign up, recruited the staff –your project is up and running. Spending on marketing can be up to 5% of projected initial takings (sometimes higher), but in our age of new technology, word of mouth and a good name go before your establishment. Just think through your social network strategy and offer some modest incentives to the first customers through the door – and you’ll soon realise that a good reputation will yield far more than money spent on advertising.
It goes without saying that however good you have been you will encounter the regulatory authorities – health and safety, and fire-safety officers. But if you pay close attention to the industry rules and regulations you will have every chance of operating smoothly and earning some very good money.