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Russian operator of Sbarro terminates contract with US franchiser

      RBC, 04.07.2016, Moscow 17:32:05.Russian restaurant operator G.M.R. Planet of Hospitality, which has been developing a chain of pizza restaurants under the Sbarro brand for 19 years in Russia, is terminating a franchise agreement with the U.S. partner, the owner of G.M.R. Planet of Hospitality, Merab Elashvili said.

      The mandatory menu for the franchisee became more expensive following the sanctions. After Russia imposed its embargo on food imports from the U.S. and the EU where G.M.R. Planet of Hospitality used to buy 70% of ingredients for its restaurants, the management of the Russian holding met several times with the U.S. partners and suggested menu options with Russian ingredients, Elashvili says. Any changes in the menu must be approved by the franchiser.

      "We hoped that our partners will heed our proposals, but since it did not happen we've started preparing for the termination of the contract," Elashvili says. "What cost RUB 30 yesterday, costs RUB 60 now, but it is impossible to raise prices commensurately because of intense competition," Elashvili adds. Russia's Sbarro increased prices merely 10%-12% during the six months from the imposition of the sanctions.

      G.M.R. Planet of Hospitality manages 88 Sbarro restaurants under a master franchise, including 54 own restaurants. Other restaurants are developed by sub-franchisees.

      Sbarro restaurants owned by G.M.R. Planet of Hospitality will be rebranded as other restaurants, according to Elashvili. The holding owns restaurants under the Yolki-Palki, Oriental Bazar, Viaggio, Little Japan, YamKee brands, as well as Cafesto coffee chain.

      The traffic of Sbarro restaurants in Russia fell and average bill decreased 20%-30% because of the crisis, Elashvili says. Moreover, some banks refused to renew credit lines to G.M.R. Planet of Hospitality in mid-2014, which resulted in a shortage of cash, he adds.

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