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Franchisors eye up Russian opportunity

Monday, 24 October 2011 | By Michelle Hammond
Australian franchises are being encouraged to consider less obvious markets such as Russia to expand into, after car-cleaning franchise Nanotek was named one of the country’s most popular franchises.

 

Nanotek, which launched in Russia less than a year ago under its former name, Ecowash Mobile, was recognised by independent franchise website www.franch.biz.

 

The website ranked Ecowash the fourth most popular franchise in Russia.

 

A total of 30 franchisees are already established in Moscow and St Petersburg under the company’s master franchisee, while 23 sub-master franchisees will be appointed across Russia.

 

“It’s quite a protracted process,” Nanotek chief executive Jim Cornish says.

 

Earlier in the year, Cornish spoke to StartupSmart earlier about the difficulties of doing business in Russia from a franchising perspective, namely the legal processes and lack of regulation.

 

“Russia, like any market, has a lot of peculiarities, so it’s important to have a good partner in those countries who can take the system as it is and give you feedback on how the system should be adapted to suit that market,” Cornish said.

 

However, he says Russia is also characterised by a strong investment culture, government and banking approval, and an enthusiasm for franchising.

 

“They are extremely entrepreneurial and want the opportunity to work for themselves... The interest we generated in Moscow was beyond anything we’d seen before,” Cornish says.

 

According to Austrade chief economist Tim Harcourt, Moscow’s growth continues to dominate Russia commercially and politically.

 

“It is now a real boomtown full of luxury cars, entrepreneurs on the make, and large doses of conspicuous consumption,” Harcourt says.

 

“Some small [Australian] players have been part of the energy boom… But there are also many Australian entrepreneurs outside the energy sector, taking the opportunity to set up in Russia.”

 

“For example, Andrey Vakulin, a Port Adelaide-based entrepreneur, sells sheepskins, textiles, meats, wine and fertilisers to the Russian market.”

 

“Andrey and his wife set up a family business after immigrating to South Australia from Russia… and they now have offices in Moscow and St Petersburg, with their global headquarters in Port Adelaide.”

 

“With the resurgence of the Russian economy, and the opportunities in energy and consumer markets, it seems Australian exporters can safely get back to [Russia].”

 

According to Cornish, the challenge for franchisors is to brand globally but systemise locally, emphasising the importance of customising franchise models to suit a particular market.

 

“It can be tempting to become possessive of the way the system is… but you need to cater to the market by getting the right [locally based] partner and acting on their feedback,” he says.