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Eastward Expedition

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After several years in senior management at Britain’s largest pub-restaurant business, is noe CEO at Rosinter, a pioneering operator of casual dining restaurants, coffee bars and transport hub outlets across Russia and Eastern Europe. he describes the parctical and professional challenges of the switch and the strategies needed to keep brands ahead is one of the worlds’s fastest-changing markets. Interview by Bruce Whitehall.

You took over as CEO at Rosinter, Russia‘s leading casual dining operator, at a time when it faced several challenges. What have been your priorities in turning the business round?

In 2008, Russia and Eastern Eur-ope were – like the rest of the world – impacted by the global financial crisis, with many companies around the world going to the wall. The Rosinter management team had done an exceptional job in battening down the hatches and making sure that, when the turmoil was over, Rosinter could retain its position as the leading mass-market, mid-casual restaurant company in Russia and the CIS.

What approach are you taking?
We‘ve developed a strategy for the next 3-5 years. The first part has been building a team, where we have striven to retain their top and key Rosinter people and augment them with talent from outside, including ex-pats. Key areas of strategy include: re-organise and build capabilities to ensure an effective and product-ive organization; re-focus the portfolio; re-establish brand leadership through brand revitalisation and operational excellence; create long term sustainable stakeholder value.
Re-focusing the portfolio has meant slowing down most investment until we have revitalised our core in-house mid-casual brands IL Patio and Planet Sushi. This is a very structured process. We cannot afford to engage in rapid roll-out programmes until we are sure brands will be successful in the medium term and will bring the right level of return on investment. Where we have smaller, peripheral brands not material to the business going forward, we will phase them out. Typical examples are traditional Russian food outlets although brands which have a specific niche, like Mama Russia at transport hubs, remain in the portfolio.

What has been the thrust of brand revita-lisation?
Ensuring brands are sufficiently differentiated and leading edge is imperative in any market in order to keep and grow guest visits, transactions, sales and profitability. Back in the early 1990s, Rosinter started the first restaurant business in Moscow and Russia with a string of concepts such as El Rincon Espanol, Le Chalet, Santa Fe, American Bar & Grill and -Cafe Des Artistes. They also started two chains: Patio Pizza casual dining and Rostik‘s fast-food outlets.
These quickly built a very strong position but that was 20 years ago. All brands need to be revitalised and that is our major -focus now. While our two core company-owned brands today – IL Patio and Planet Sushi – are among the most recognised in Russia, attention needs to be paid to our properties, interior designs, the ergonomics of kitchen layouts, training and menus which excite our guests to give our guests a really good value, hospitable experience.

What about site selection?
That too has required new thinking. Like any large business, we need to churn the bottom end of the estate in order to bring on higher volume trading businesses at the top end. As markets grow, they also move and you have to move with them. New shopping centres get built and flourish and we have to follow where -people want to live and find out where new business’s and retail opportunities are developing. So all the time we have to update our site criteria and ensure we go where the people are and where the money is.

Where is the geographical focus?
There is no question that the greatest proportion of our units, both wholly owned and franchised, are in Moscow (nearly 200 units) and the Russian regions (144 units). But the Moscow region contains a huge population and still offers many new opportunities. Meanwhile, we have attained a significant presence in the CIS (nearly 50 units) and have a significant foothold (22 units) in the Baltic states and Eastern Europe (figures at November 30, 2012).
If you compare the UK with a population of 60 million and 230,000 restaurants, Russia has 145 million people yet the current total of restaurants is in tens of thousands. So, while competition is tough, there is huge growth potential.

What have you been doing to update the core brands?
A revitalised IL Patio pilot store that opened a few months ago incorporates various innovations in menu, targeted promotions and local marketing. Results from that trial have been fed into three other test stores: two IL Patio and one Planet Sushi. These and other pilots during 2013 will be carried out in both Moscow and the regions to see how well ideas work in different geographies and locations before we precede to a commercial roll-out across the corporate and franchised network.
Changes have involved design refreshment as well as an improved customer experience and we have sought inputs from international innovators like Alan Yau (creator of Wagamama, Busaba, Hakkasan and other brands) at Planet Sushi and the Sarum design group at IL Patio. They are proving significant catalysts in revitalising the brands for the next decade.

What about brands which Rosinter itself franchises?
We continue to work closely and successfully with TGI Friday‘s, the brand which Rosinter first licensed from the USA‘s back in 1997 and which marked the company‘s first venture at a transport hub (Moscow Sheremetyevo Airport in 2003). Since 2006 Rosinter has had a global development agreement giving exclusive rights to develop TGI Friday‘s in 19 countries including the Baltic states, Austria and all the former Yugoslav republics as well as Poland, the and Hungary. Of the 36 restaurants we currently operate, 23 are in Russia with the remainder in Belarus (1), Ukraine (2), (3), Hungary (3), Kazakhstan (1), Poland (1) and Latvia (2)
In 2007, we signed a joint venture agreement with the UK‘s Whitbread under which we operate units. There are currently 28 trading in Russia, which has become a very important market for contemporary coffee bars. With Costa and TGI Friday‘s, we are franchisees and also development partners, with exclusivity in Russia.

What‘s the situation with your McDonald‘s franchise?
In March 2012, we gained rights under an agreement lasting until April 2023 to operate McDonald‘s fast-food restaurants at Moscow and St Petersburg transport hubs, both airports and railway stations. We are presently in advanced stages of tenders with several hub opportunities and expect to open two in 2013.
I am very excited to say that our St Petersburg contract means introducing eight McDonald‘s restaurants. We have also signed a contract with the Russian railway company to open around 13 foodservice units under our corporate and franchise brands in five major Moscow railway stations in 2013-2014.
Rosinter pioneered franchising in Russia. Does that continue to be an important expansion route?
Very much so. The company‘s experi-ence in this area benefited from the TGI Friday‘s connection and was applied very successfully with the Rostik‘s quickservice fried chicken chain. That became part of a strategic alliance with Yum! Brands in 2005, leading to the -development of Rostik‘s-. The lessons learned there spread to the IL Patio -casual-dining business.
Around 35 percent of Rosinter‘s restaurant business is now in the hands of franchisees, with around 130 franchised stores. Units require high traffic locations and investments around US$1,500-2,000 per sqm per store. Total floor areas average 320-350 sqm (IL Patio) and 250-300 sqm (Planet Sushi.)

Does the Rosinter approach to branding and franchising have any similarities to that of your former employer, Mitchells and Butlers?

Both companies are notable for being multi-brand organisations, with a portfolio which gives a balance across markets and across seasons. With regard to franchising, we had a somewhat different system at Mitchells and Butlers with what we called lessees. They developed their own offers and we supported them with access to our centrally developed models for finance, HR, quality and standards, purchasing and so on. But we did not provide them with brands. M & B‘s branded chains like Harvester, Vintage Inns and All Bar One are owned and managed in-house. Rosinter, by contrast, is a truly branded franchise.

What in your opinion makes a good franchisor?

A good franchisor needs to have differentiated brands which have genuine strength in the marketplace. They need to be able to offer environments, products and service so that people come again and again. That needs to be backed by a level of support which ensures that prospective and existing franchisees can fully implement the best environment, products and service and can develop their personnel so they also grow with the business.
Our role as franchisor is to continue to innovate and develop the franchise – to continue to excite our guest base and new guest bases. And we need to make sure that our franchisees are with us all the way. They are investing their own money and toil into the business so as franchisor we have to make sure that we give them value.

What makes a good franchisee?
It is critical that you work with partners who are like-minded, who share the same values and the same goals. They also need to understand the restaurant business and the hard work and passion required to maintain execution in the market. If you have different goals and agendas, it just won‘t work. We want them to be rich and the only way that will happen is in delivering the brand flawlessly. Thankfully, most of our franchisees have been with us a long time, over 15-18 years in some cases.

How do opportunities for women in Russian foodservice management compare with those in the West?
In the UK there has long been a debate about a ‘glass ceiling’ which makes it more difficult for women to get to the top jobs. But I‘m not sure how much that situation applies in the hospitality sector. Certainly Mitchells & Butlers had plenty of women at the top, entirely because of merit and nothing to do with the fact that they were female. They were formidably experienced and great people to work with.
Coming to Russia, I was not sure what to expect. Going back to the old Communist days there were women in senior positions in the bureaucracy but the opportunities did not exist so much in business because there was no business on Western lines. But I have quickly found that Rosinter has the same kind of culture as we had at Mitchells & Butlers. It‘s basically a meritocracy and getting women to make a meaningful contribution to management is not an issue. You just need to look at our top management, where four of the eight executives are female

How would you characterise the typical user of Rosinter restaurants and how does this contrast with the UK?
In the early post-Communist years, dining at our restaurants was mainly for special occasions, with families dressing up, but it‘s now much closer to the casual experience you find in the West. Russia today has relatively high levels of disposable income, which stem to an extent from a higher level of property rental compared to ownership. However, rents in major cities like Moscow have risen considerably in recent years.
It‘s important to have an affordable, mass market positioning which is accessible from the perspective of price, product and environment. That helps ensure that we get a good spread of ages and demographic mix. We also expect to attract business people and office workers – male, female – at lunchtime. Planet Sushi has been particularly successful in appealing to younger females.

The Russian commercial restaurant market was virgin territory when Rosinter started in the 1990s. But the past few years have encouraged the entry of many new competitors, often with innovative concepts. How difficult is it to stay ahead?
Staying fit for purpose is a constant challenge for any brand in any market. There are plenty of examples in the UK of brands which failed to revitalise and keep up with what people wanted. Rosinter brands had the first mover advantage. They were the early settlers, and had the arrows in their back to prove it.
Now, of course, eating out is a much more commonplace and casual experience. As the market has grown, it has become more challenging in terms of competition, but that pressure has also given Rosinter more of a focus to revitalise its brands and keep them in tune with today and the next decade. If we don‘t, our guests will go somewhere else.

What brought you to Russia?

The Rosinter board‘s rationale when they were searching for a new CEO was to have someone with multi-brand experience who understood branding in the mass, mid-casual dining sector. I never had any intention, at any stage, of living and working in Russia. When 2011 dawned, I was working very happily at a long-established and highly thought-of British public company.
How did the opportunity to work at Rosinter present itself?
One of the few industry events I attend is the annual European Food service Summit in Zurich, which I rate very highly for its educational value and innovation focus. At one of the networking events, I ran into Rostislav Ordovsky-Tanaevsky Blanco, the founder and builder of Rosinter and now non-executive chairman. I found him to be a very charismatic, people-orien-tated individual. They were looking for someone for the then-vacant CEO position and were going through a rigorous process, evaluating candidates from America, UK and Russia. When I eventually came through that and into the job on Feb 20, 2012, the previous incumbent had left and there had been a vacancy for a good 12 months.

What was your background before joining Rosinter?
I have spent most of my working life at Mitchells & Butlers (M & B), Britain‘s largest operator of casual dining pub-restaurants. I started with them as general manager of a Toby carvery restaurant in Coventry and then was promoted to area manager. I then went into M & B‘s special developments division where we trialled and rolled out new concepts. I became general manager, then area director, and then regional director.
From there, I moved up to managing dir-ector of the M & B restaurant business and in 2010 was appointed director of corporate strategy, marketing and business development. M & B is a fantastic business and I have very fond memories of my time there. It was difficult to leave.

How long did you take to make the decision to move? 
Probably about six months. Bob -Ivell and other senior figures at M & B asked me to reconsider and stay with them. But I came to the conclusion that I had had a very good run there. The opportunity to go and do something else became, for me, very compelling.
Rostislav and the rest of the team at Rosinter did a very good job at persuading me. They were very open and honest about the business, helping me understand it and also helping me understand what life would be like living and working in Moscow and Russia. I liked what I saw, and I felt I could do a good job for Rosinter. I perceived that we had aligned values and over the past 10-11 months that has proven to be the case.

What has been the domestic impact of working in Russia?
My home is now Moscow. You have got to be there to run a Russian business. Being part-time just doesn‘t work. But I still have a house in the UK and come back once a month for a short weekend. And my wife Denise comes to Russia each month for up to two weeks. It all works out very well.
We have a large family of seven children: three of our own and four who became part of our family following the bereavement of my sister and brother-in-law. We‘re very close and that was a big consideration. But they are all grown up now and actually very supportive of me going to Russia so it did not create domestic difficulties. I suppose it would have been very different if they had still been at school
The birth of our first grand-child Emma -after I had agreed to the move did, I must admit, make things a little bit difficult but they have been over to see us in Moscow.

What have been the main challenges of moving to Moscow?
I already had some experience of working outside the UK at Mitchells & Butlers, where my responsibilities had included the managing directorship of their Germany-based Alex restaurant chain for four years. I was also MD of Volvo UK for two years in the mid-1990s, which involved monthly visits to the head office in Gothenburg.
Before working in Russia, I made 4-5 exploratory trips to make sure that I was doing the right thing. My chairman and team also did a great job of initiating me into the real Russia, CIS and Eastern Europe.
There is a large ex-pat community in parts of Russia, in particular Moscow, and there are organisations which work very hard to help outsiders familiarise themselves with Moscow. But to be honest, my wife and I would much rather make friends of Russians and integrate ourselves into Moscow through the relationships which we create, and that is working out very well.
What have you liked least about working in Russia?
I have spent most of my life in the UK and Ireland (where I spent my early years before my family migrated to England). I now realise that we are spoilt in both countries because of the relative distances. You can go round and touch most of your restaurants to quickly find out what is going on. Russia is so vast that you are often taking 8-10 hours or more on a train or plane. I have found that personally challenging because I like to get under the skin of what is going on.
On the other side of the coin, we have a good structure and strong team with unified thinking and values to implement our strategies and operating standards and they generally have excellent local knowledge. As well as the headquarters in Moscow, we have small regional offices in Novosibirsk, (Siberia), Prague, Budapest and some of the regions and that makes sure that we stay close to the market and close to our franchisees and corporate restaurants. We cluster our teams around those regions and that works very well indeed.
As international business, Rosinter has worked with ex-pats and has a good record of making sure that they fit in well. The current COO Lori Daytner is an American ex-pat who has been in Russia for over 20 years; she joined the company in 1992 as a training manager and rose to President/CEO for the -period 2006-2009.

What has been most difficult for you as a foreigner coming to work as a top manager for a Russian company? 
The main differences I have felt have stemmed from the more hierarchical corporate culture in Russia, with a higher degree of bureaucracy in planning and execution. In Rosinter we are determined to build further on the guest–focused/team focused organisation based on meritocracy.
As for the people, anywhere in the world they are the same with their usual advantages and disadvantages. My main goal has been to use and develop their best qualities and skills. Russian people generally have a very good education, and many of them are talented managers. As a consequence of the immaturity of the Russian free market, many of them have grown up within a very young business environment and they have had to work as generalists, not specialists. Attracting Russian nationals specifically focussed on key hospitality drivers has therefore been more difficult to find in what is clearly an employee‘s market.

What personal and practical challenges are posed by the language barrier?

In conversations it is very important to confirm clear and unified understanding of everyone involved. Most of my meetings are held in English with translation available as required. My assistant helps me, of course, but the Russians are savvy people. They know how to read lips and body language and are not afraid to seek clarification, particularly where there may be a difference of views around the table. There certainly have been funny and sometimes curious cases of total misunderstandings (some on my own part, I must say). But it all adds to our enjoyment of work; it keeps us smiling and in a good mood as well as building great teamwork.

What do you particularly like about the restaurant business?
People in this business are special in their passion, their work ethic and their desire to win. And the business itself is notably broad in its scope. We manufacture, we package, we present, we deliver, we invoice, all in one experience. So it‘s very hands-on
Both Mitchells and Butlers and Rosinter are publicly listed so the professionalism and diligence required is very comparable. Another similarity is in their shareholder bases with very large shareholdings held by individuals (Joe Lewis at M & B and Rostislav at Rosinter, both know the restaurant business very well and are active and supportive).
I suppose the biggest differences are in market maturity. Only 20 years ago, nobody here except the government owned anything. In the West, our major postwar restaurant brands had a big headstart: McDonald‘s since 1954; Red Lobster 1968; Berni Inns (which people still think exists in the UK) 1955; Beefeater 1974; Toby 1975. That‘s a big difference and they have had a lot of catching up to do. They have also needed top-class training and development.