There, to Where Capitalism is Born!
Basically, Patrice ended up in Russia due to a phone call. One summer day in 1992, his telephone receiver yelled with the voice of his friend Michel Chovet: “Patrice! I have a job for you. But to take it you need to do just one small thing, and that's come to Russia!”
“I grabbed a map and was horrified: Russia is kind of not Europe, but is still not quite Asia. And what is happening there: perestroika or a shoot out? From the news on TV it was difficult to work out,” smiles the Frenchman, as he thinks back. “But Michel called every day and convinced me: 'An ideological anti-communist revolution is going on here! Capitalism is being born. We are creating a restaurant here from scratch, and the profit is sky high!' And so I thought to myself: What would I lose if I went there for a couple of years and then came back?”
I grabbed a map and was horrified: Russia is kind of not Europe, but is still not quite Asia. And what is happening there: perestroika or a shoot out?
His first day in Russia brings back mixed emotions.
“People's faces were so stern. They viewed strangers with suspicion. From the airport I found myself immediately in the kitchen of the restaurant “Potel et Chabot” at the Hotel 'Mezhdunarodnaya' where the role of a consultant laid in store for me. I didn't know a word of Russian! But luckily the local cooks spoke English fairly well.
After three days, Patrice learnt his first words of Russian. The customers called him into the dining area to say “You'll lick your fingers!” (in Russia this means: “So very tasty!”).
“You'll lick your fingers!” the Frenchman would repeat, as he passed on the secrets of preparing duck liver “Foie gras” and “Confit de canard” to his muscovite colleagues. And the customers ordered his dishes two to three portions at a time.
“They were overjoyed like small children discovering a new taste. Every day we prepared dishes with which in France we only regale ourselves at Christmas. But in Russia they like to organize festivities every day!”
My Business with a Partner
By the summer of 2002, I had managed to save a little money. And I thought about opening my own café. I didn't have enough money to do that, but a Russian acquaintance, a businesswoman called Olga, approached me and asked: “Patrice, what do you think about pancakes?” I said “Pancakes are unbelievably popular at home, especially in Normandy and Brittany. We make “crêpes” from wheat flour and “galettes” from buckwheat.”
Olga was just about to open a chain of pancake houses and she asked if I would want to help her? It was tempting, all the more so as I didn't know of one French pancake house in the city. We came up with the name straight away: “Créperie de Paris”.
“For a foreigner to open a restaurant or café in Russia, to obtain the necessary permissions, an alcohol licence, is very complicated. All the more so if he doesn't understand or cannot read Russian. Yes, it's possible to find a list of all the necessary paperwork on the Internet, to go to the relevant authorities, stand in line for half the day, only to be told that you lack this or that certificate. And it is possible to go round in circles for months like that. And time is money.
Foreigners wishing to start their own company in Russia usually look for a local managing director, with relevant experience.
“Therefore, foreigners wishing to start their own company in Russia usually look for a local managing director, with relevant experience. I'd call him the “head”, the most important person at the first stage. Usually his salary is 45-60,000 rubles (1,500-2,000 USD), depending on the size of the company. You can find him through an employment agency, although it's better if you come across him through reliable recommendations. Though it's impossible to be sure that although he is “a friend’s friend”, this director won't try to pocket your hard-earned cash... Alas, it was just this kind of villain my partner ran into. He paid twice as much as was needed to repair the premises, which Olga had found on Profsoyuznaya street, near the Akademicheskaya metro station, and for the furniture, evidently pocketing half. In the end we fired him. And we bought the kitchen equipment ourselves at a reasonable price. We came up with the design for the interiors ourselves too.
Oleg Khlebnov, Managing Partner of Inventica:
“High rents and administrative obstacles are traditionally the main psychological barriers to investors entering the Russian – and especially Moscow – restaurant market. Thus, every restaurant in Moscow accounts for 1,721 people, whilst in London it is 488 people, in New York 228 and in Paris 131. In such conditions the future income quickly compensates for the initial difficulties. Today, the average bill in the Casual Dining sector of Moscow restaurants is 35-45 USD with a 300% mark-up on food and a 400-450% mark-up on alcoholic drinks. A restaurant establishment requires 150-200 customers a day to ensure its comfortable existence, whilst the most successful of them attract up to 500 customers a day and more.“The cost of opening a restaurant in the Casual Dining sector in Moscow is 1,500-2,000 USD per sq. m. Rents for a central location are 55-60,000 rubles (1,800-2,000 USD) per sq. m. a year. Operating in such conditions is peculiar to popular chain restaurants of the Upper Casual Dining sector. Simpler establishments with a less sharply defined image are located in premises with rents of 30-45,000 rubles (1,000-1,500 USD).“The discounted payback period for restaurant establishments in Moscow is 3.5-4 years, and that of successful Casual Dining chains varies from 2 to 3 years.”
“We had the posters, based on the style of the beginning of the last century, made by one of the printing houses, and the lanterns, from our sketches, by a country smith,” continues Patrice. “We designed and ordered the personnel uniforms ourselves. And an expert we invited worked out the layout and connections for the electric sockets and the calculations for the power-capacity for the ovens.
The café was located near to a large shopping center on a lively street. But it was the height of summer and people left for their dachas (summer houses). And we were afraid that the pancake house would be empty. But customers came in crowds!”
“Crêpes Suzette” for Muscovites
What proved to be an all-time hit were the crêpes: thin, elastic pancakes with a variety of fillings. People were fascinated by the French names: “Camembert”, “Suzette”...It was possible to sit at a small table and feel as though you had been transported to the Champs -Elysées, to Montmartre.
One elderly lady, trying a “galette à la normande”, let slip: 'Well, well! A Frenchman has resurrected our ancient Russian recipes!'
“People said to us: 'It seems as if you have collected aromas from the whole world here, some kind of herbs, trees, ship's varnish...' And one elderly lady, trying a “galette à la normande”, let slip: 'Well, well! A Frenchman has resurrected our ancient Russian recipes!' She didn't know that at home, in France, such galettes have been around since ancient times. Overall, I like how Russians don't go in for pretence and speak their minds. It has happened that, when I have asked someone whether they like a certain dish, they have replied 'No, I don't like it'. It isn't nice, but it is useful. You can correct any mistakes.
”Patrice is impressed by the fact that Russians, just like the French, are gourmets and good judges of food.
“The only thing is that we drink wine more, and with you it is vodka. I still had to get used to the toasts in Russia. Back home it is not customary to make speeches at the table. Or to sing songs. But now I have soaked up these Russian traditions.”
Igor Bukharov, Restaurateur, President of the Restaurateurs' and Hoteliers' Federation of Russia:
“Moscow's restaurant market is far from saturated. Now, in Russia's capital, as before, there is a lack of medium-priced, democratic, accessible restaurants. Despite this, coming up with a good product in terms of a restaurant is far from working for everyone. Every year dozens of restaurants change ownership or close down, and new ones appear in their place. Amongst these, there are very few restaurants in Moscow with foreign owners. And more often than not they are not the outright owners but work together with Russian partners. There is nothing surprising in this: one needs to know the specifics of the Russian market very well to be competitive and win the battle for the customer.”
Such is the Specific Character...
“When I first came to Russia, it surprised me that as the working day was coming to an end, the whole kitchen area, even down to the last fridge, was locked up. No such thing ever happened in France. I asked: 'Why is this?' And it was explained that 'If everything was left open, there would be nothing left.' I couldn't understand why anybody would want to steal from themselves. It was said: 'People's salaries are low and they'd compensate it by taking extra food.'
“So, we imposed strict control. At any given time we open the till and check the takings against the bills. In the mean time, our prices for pancakes were laughable. A large crêpe sprinkled with sugar cost 40 rubles (1.33 USD). Our profits were very small indeed. In order to expand the business, we raised the prices twice, but our customers didn't stop coming.
”Patrice Tereygeol and Olga opened a second “Crêperie de Paris” right in the center of Moscow, near to Mayakovskaya metro station.
“The rent there was very high. Generally, rents in the center of Moscow are a lot more expensive than in other cities in Russia or in Europe. What is more, in Paris it is possible to sign a ten-year lease. But in Moscow, there was a time when you could only rent premises for 11 months. And when the lease ran out, you could be asked for 30 or even 50% more. But a café or a restaurant isn't a shoe shop where you can just pick up your boxes and move. Here, in the kitchen, we are talking about special equipment, and in the dining area there is high quality decoration, designed interiors...
”Patrice and Olga had to close the café near Mayakovskaya due to considerable rise in rent. It was then that he started to learn about the particularities of Russian accounting and law.
They had to close the café near Mayakovskaya due to considerable rise in rent. After that he started to learn about the Russian accounting and law.
The partners began to seek out premises with long-term leases where it was clearly spelled out by how much the rent might go up depending on inflation.
“We opened our third café in Sokolniki having leased the premises for 10 years. There was a florist's shop there before. There was water in the basement, the walls were damp...We had to carry out a major overhaul. On the other hand, getting furniture was no problem at all: by that time a number of specialised shops had opened in Moscow.
The Particularities of Business in Russia
In Patrice's opinion, foreigners still fear the notorious local gangsters who, in the 1990's, offering protection, would extort money from entrepreneurs. But, in Patrice's words, at the start of the 2000's, it was a whole different kind of racket.
“We could be visited by various inspection authorities who could find a trivial infringement and then ask for money to close their eyes on it. How was it for me, for example? We opened a new café, someone came to carry out a fire inspection, examined everything and accepted the 'facility'. But he reappeared three months later for another inspection and... found a whole raft of infringements, faults which he 'hadn't seen' earlier. How is that possible? To stand up against such a system isn't easy, but it's possible. To do this, I, for example, began to look into the relevant laws, study all the requirements indicated there. Now I know exactly what I have the right to do and what I don't. And I don't pay any bribes to anyone.”
Russia is a country of infinite possibilities. Of course, there is a risk here, like anywhere. But you can gain more here than in any other country.
Incidentally, it was precisely due to this situation that in 2008 in Russia a special law was passed. It is called “On the Protection of Legal Entities and Individual Entrepreneurs in the Exercise of State Control (supervision) and Municipal Control”. In this law it is clearly stated that scheduled inspections can now be conducted no more than once every three years...
Although business in Russia is now no longer as it was 20 years ago, running a restaurant or café here is profitable, as it was in the past. All the more so as many regions remain unclaimed.
“Russia is a country of infinite possibilities,” says Patrice as he summarises his insights with authority. “Of course, there is a risk here, like anywhere: it is possible to lose a great deal. But you can gain much more here than in any other country in Europe, if not the world. As the Russians say: ‘He who does not risk anything will not drink the champagne'”.