Franchising in Russia

The Russian market has generally been considered as a highly unpredictable and unfavorable business environment (Mendelshon, 1996; Alon and Banai, 2000). However, recent economic stabilization programs and government reforms have made the appearance of Russia more appealing in the eyes of foreign investors. The aim of the chapter is to provide a general environmental framework for analyzing the international franchising environments in Russia, contributing to franchising practitioners' ability to enter the market successfully. The U.S. Commercial Service in Russia has identified franchising as a sector possessing a significant potential for development and offering vast opportunities for U.S. franchisors (Sarkisov 2002). The conditions for franchising in the country are becoming more attractive as the economy has shown remarkable stabilization since the economic crisis in 1998. The demand for high quality Western products is prevailing. Russia's effort to join the World Trade Organization, WTO affects positively the business and economic environment. The Russian government is making an effort to build an efficient market and to raise the country's standard of living. Substantial progress has been achieved in improving legislation governing economic, business and investment activity. The state is consolidating its control functions and implementing structural reforms such as moderating the tax burden of enterprises. The chapter aims to analyze Russia as a target market for international franchisors. First, past research and literature on franchising in Russia is reviewed. The country analysis includes five parts, (1) demographics, (2) economy, (3) social and political environment, (4) culture, and (5) legislation.