Sparking a Chain Reaction

Merab Elashvili
Merab Elashvili is widely revered in business circles as the man who brought vision and style to the franchising business in Russia.

Shy, soft-spoken and thoughtful, little in his appearance betrays his growing prominence or testifies to the ease and rapidity with which his franchisee mushrooms across Europe.

In 1997, at the age of 23, Elashvili took an unusual step for those post-Cold War days: he applied for an exclusive franchise of Sbarro Inc., a U.S.-based chain of Italian fast-food restaurants, to develop the chain in Russia.

"Initially, Sbarro Inc. executives did not know what to make of the request by a young Soviet man with no experience in the restaurant business, so they foot-dragged as long as they could," he said, adjusting his composure in a plush leather chair.

His perseverance and persistence was rewarded, when Sbarro "decided it was worth a try," issuing the budding businessman the exclusive rights to the food chain's franchising development in Russia.

His business, Brothers and Company, is now the exclusive franchisee of Sbarro not only in Russia but in the other Commonwealth of Independent States countries, as well as the Baltic states and Central and Eastern Europe.

The venture that would make Elashvili Russia's king of franchising, as friends fondly call him, was a child of circumstances.

Elashvili was born in the then-Soviet state of Georgia to a Jewish family in 1974. His father died when he was 3 years old, leaving him in the care of his mother and grandparents. They sent him, at the cost of their life savings, to the Industrial College in Tbilisi, Georgia, where he graduated as an economist. He was forced to flee Georgia in 1992, however, when bottled-up discontent against decades of Soviet rule spilled onto the streets.

"As a member of an ethnic group that always attracts attention when things are not what they should be," Elashvili said he had no choice but to leave Georgia in 1992 with most of his relatives and Jewish friends.

That was before his 18th birthday.

"Some Jews went to Israel, others to Europe but, for some inexplicable reasons, Russia held a particular attraction for me," Elashvili said.

Elashvili, 33, said his first business experience in the newly independent Russia left him stretched and called on all his faculties and self confidence.

Merab Elashvili
Merab Elashvili's company is the exclusive franchisee of Sbarro Inc. across the CIS.
"With the help of my brother, Georgy, I started buying an odd assortment of goods like candies and chocolates through friends in Europe to be parceled and posted to Russia," he said. "This was on a very small scale because initially, my friends over there never wanted to risk large sums of money on exports to me. I was simply too young to be trusted with big sums of money."

Elashvili said he spent most the early '90s working hard to justify trust and build confidence, a strategy that paid off, rewarding him with the first capital to start his franchising business.

"My biggest challenge then was expanding the modest Russia footprint into the CIS and becoming a genuine European player," he said.

But his dreams were almost eclipsed in 1998 when financial crisis shook the country.

"Our business was in limbo for months and this naturally raised questions about the viability of franchising as a business model in a developing nation with an unstable economy. The crisis meant closing outlets and cutting back on personnel but we were able to wade through."

His saving grace, he said, was royalty payment deferment extended to his chain of Sbarro outlets by the U.S.-based company. "Sbarro Inc. also allowed our budding company to buy some food ingredients locally to stave off complete collapse," he said.

Drawing from Sbarro's success after the post-crisis rebound, Elashvili started the Vostochny Bazar and Bash-na-Bash restaurant brands in 2002, followed in 2005 by a chain of Italian restaurants, Viaggio Italiano.

Earlier this year, Elashvili set up an umbrella company, GMR Planeta Gostepriimstva, that would manage assets of his chain of restaurants.

"GMR is an acronym of the first names of the founders -- Georgy, Merab and Roman," he said. "The two played a big role in my life, by putting their trust in me."

GMR Planeta Gostepriimstva is a sprawling network of 160 restaurants of diverse concepts, including Sbarro, Vostochny Bazar, Viaggio, Bash-na-Bash, all over Russia, the CIS, Eastern and Central Europe. It employs 3,500 workers and claims 2 million customers a year.

His impressive management style was noted by Gennaro A. Sbarro, Sbarro's former president of franchising and development and owner of U.S.-based Neo Hospitality, who cited Elashvili as "a key source of inspiration."

"He's one of Sbarro's top franchisees and one of the greatest operators I've done business with in my career," Sbarro told Nation's Restaurant News, a U.S.-based magazine that provides news stories and reports trends in the restaurant and food service industries.

Elashvili's keen business sense and pragmatic approach to franchising have also been rewarded by a long list of awards, professional recognitions and accolades. He was voted the best manager in 2003 in the sector of Products & Services of Mass Demand by Kompaniya business weekly. He won the Ernst & Young 2004 Entrepreneur of the Year Contest in Services and Transport category and again in 2006, for Outstanding Business Growth.

Late last year, Elashvili was met with applause from a crowd of businessmen as Ernst & Young added yet another feather to his cap by naming him Entrepreneur of the Year in the International Business category.

Elashvili heads the franchising committee of the business lobby group Opora Rossii, or Support for Russia, where he has been pushing for business-friendly franchise regulations.

He typically works 14-hour days, not solely from his suite of offices but also from his car, checking in on his far-flung operations. A father of three, Elashvili said his family occupies "a very special place in my heart."

Perhaps with a backward glance at his own difficult childhood, he stressed that every business executive should push for social changes through charitable activity and community involvement. "In its activity a company must take into account the interests of a community as well as the resources it uses," he said.

"Elashvili is active in social circles and is a strong believer in the social responsibility of business," said Irina Gorbulina, president of the Russia Academy of Business and Entrepreneurship, who has known Elashvili since 1997. "He's the ultimate professional and businessman and not one to rest on his laurels."