KFC chain in Russia is going through turbulent times

Departure from Russia

Spain-based restaurant operator, AmRest, said in a statement on 7 December that it agreed to sell its KFC restaurant business in Russia for at least €100 million to Russian restaurant and entertainment company, Almira.

In March, AmRest began the process of temporarily suspending the operations of its brands in Russia after a relevant announcement was made by Yum! Brands, the owner of the KFC and Pizza Hut brands.

Closure of the deal is subject to approval from the competition authority in Russia, Yum! Brands and other approvals by regulatory authorities in Russia. The company stated that the final terms of the transaction are subject to some external factors, including the exchange rate.

KFC used to be one of the leading fast-food chains in the Russian market. AmRest operates 215 outlets, primarily in the largest Russian cities. In total, more than 1,000 KFC restaurants operated in the country at the beginning of 2022.

Transition causes pain

Some KFC restaurants in Russia have already changed their banners to a new chain named Rostic’s. However, such a step entailed a nearly 20% drop in revenue, estimated Sergey Mironov, chairman of the coordinating council of the Federation of Restaurateurs and Hoteliers.

He explained that all franchise holders have individual license agreements, which means that some restaurants have to change their banners earlier than others. The problem is that the KFC brand has strong recognition among Russian customers, and Rostic’s has not.

“It is unclear what franchises should do in this situation. If it converts into Rostic’s, it will help the new owner to develop its brand. If it stays as KFC, sooner or later, it will still have to change it [the name] due to the expiration of the license agreement. My advice: is to switch to their own brands,” Mironov said, adding that still, this situation is “deadly” for the businesses.

Turbulent fast food market landscape

In 2022, the KFC chain will likely experience a rise in revenue in Russia, despite huge turbulence in the country’s restaurant industry, which is primarily attributed to the withdrawal of Mcdonald’s from the market in the middle of the year, the Russian think tank Infoline Analytics said. Like Burger King, and other major fast-food chains, KFC managed to attract some customers, which previously were primarily loyal to Mcdonald’s, the analysts assumed.