Rosinter Eyes Russkoye Bistro Chain

MTAnalysts say that despite heavy promotion and prime locations from City Hall, Russkoye Bistro has failed to win a loyal following.
Rosinter, the operator of restaurants like Patio Pizza, Rostik's and American Bar and Grill, is looking to add a new chain to its platter -- Russkoye Bistro.

Management rights for the 30-outlet chain, founded and controlled by the city of Moscow as a rival to McDonald's, is going up for auction by the end of the year.

But despite getting heavy promotion and prime locations from City Hall, the fast-food chain offering fruit- and meat-filled pies, Russian salads and kvas has failed to win over a loyal following, consumer analysts said. In comparison to bustling rivals McDonald's and Rostik's, Russkoye Bistro outlets typically see much slower turnover, they said.

City Hall officials, who have yet to recoup the $2.5 million they invested in the chain, blame the failure on the 1998 crisis. However, the officials said they hope they will be able to maintain the chain and even open dozens of new outlets with the help of new managers.

"The Moscow government needs to revive the chain somehow," Rosinter spokeswoman Yelena Novitskaya said. "After all, for this, they need a professional manager."

Novitskaya said Rosinter is in "serious" talks with Russkoye Bistro about its participation in the tender.

Rosinter is ready to arrange investments of more than $1 million into the chain, according to news reports.

Russkoye Bistro representatives were unavailable for comment. The chain does not disclose its financials.

Probably no one has exploited Russians' appetite for foreign flavors more than Rosinter founder Rostislav Ordovsky-Tanayevsky Blanco.

He started out with the Spanish Bar in the early 1990s and has since added Patio Pasta and Patio Pizza, Le Chalet, Santa Fe, American Bar and Grill and Planet Sushi to the portfolio. Rosinter runs about 60 restaurants in Russia, including 20 Rostik's.

While Rostik's has no ethnic feel, Russkoye Bistro is a chain that is quintessentially Russian and would make a nice addition to Rosinter's cosmopolitan empire, analysts said.

Alexei Krivoshapko, consumer analyst with United Financial Group, said Russkoye Bistro, in reality, may not necessarily be loss-making at all even now. Given the low prices and generally low overheads, its profit margin may be rather high.

Russkoye Bistro may be getting special treatment from the Moscow authorities in regard to rent on its outlets, Krivoshapko said.

Alhough there are never lines outside a Russkoye Bistro restaurant, "you have to have a special talent to make such a business loss-making," he said.

The city government's planned tender could also be a first step toward spinning off Russkoye Bistro.

"By giving the bistros a little makeover, Rosinter could significantly increase the profit margin," Krivoshapko said.

City officials may have other reasons for distancing themselves from Russkoye Bistro. According to press reports, some of the city's initial investment into the chain was misspent. Thus, a 15 percent stake in Russkoye Bistro was at one time personally owned by Vitaly Usov, former head of the company and deputy head of the Moscow consumer department, Russian newspapers have reported. The government, which financed the project, later took all minority stakes for debt.