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. Last Updated: 07/27/2016

Taco Bell, Pizza Hut, KFC Eye Expansion

The number of Western chicken, pizza and burrito restaurants dotting city streets is set to grow as Yum! Brands Inc. pushes to increase the Russian presence of the restaurants whose trademark it holds, including household name eateries like KFC, Pizza Hut and Taco Bell.

Yum! is one of the world's largest global franchising networks; the 34,000 restaurants operating under its brands made $22 billion in 2002. By sales it is surpassed only by McDonald's.

Twenty percent of these 34,000 are owned by Yum! itself while the others are franchises it licenses other firms to run.

Steve Varsano, head of European business development for Yum!, was in Moscow this week to meet with Russian companies willing to open KFC and Pizza Hut franchises.

"We want to work with local companies that are capable of opening 20 KFC and Pizza Hut restaurants," he said.

Yum! is planning to open at least 120 restaurants in Moscow by 2010. Four Moscow companies have already been selected as franchisees. Negotiations are still underway with two more companies, Varsano said.

This is the third attempt to expand the presence of KFC and Pizza Hut, which presently have 10 outlets in Russia. McDonald's, by comparison, has 104 outlets, while Rostiks Group has 39 chicken eateries.

In Moscow alone, the fast food market is estimated to be worth $350 million per year.

In the early 1990s, PepsiCo, which owned these brands at the time, opened a number of restaurants in Moscow. In 1998, the year of the financial crisis, Yum!, which acquired these brands from PepsiCo, refused to extend the franchise agreements.

In 2000, Singapore's Acma Technologies won KFC and Pizza Hut franchise rights for Moscow. But two months ago its KFC restaurant on the Arbat was closed because it "didn't meet standards," Varsano said.

Vitaly Rudov, general manager of the "Singaporean" Pizza Hut chain in Moscow, said that AMR, an abbreviation for American Restaurants, has opened both a KFC and a Pizza Hut inside the Ramstore on Leningradskoye Shosse. AMR is a subsidiary of Pizza Nord, the only company to operate KFC and Pizza Hut outlets in St. Petersburg, where it has four Pizza Huts and two KFCs.

Pizza Nord general director Vladislav Ivanov said that in the next five years his company will open 20 additional restaurants in St. Petersburg and 30 in Moscow.

Opening franchise restaurants will require serious investment, since Yum! itself is not planning to invest in Russia.

It would take between $250,000 and $300,000 to open a new Rostiks in a building of its own, said Alexander Morozov, deputy general director of Rostiks.

Ivanov estimated that it would cost $500,000 to $1 million to open a new KFC or Pizza Hut restaurant.

But Andrei Petrakov, a restaurants analyst at Asessor consulting agency, doubted whether Yum! could meet its target of opening 120 restaurants in Moscow by 2010, a pace of about 20 per year, given the lack of suitable real estate locations and the administrative barriers to acquiring such property.