X5 Retail Group, Russia’s largest retail holding, chooses the system of “reversed franchise” to make expansion of their retail network easier. This new simplified system of franchising has a lower threshold for franchisees (lower costs, no monthly licence fee, no own purchase investments), but lets the franchisee keep a commission of 13 to 18% of his business’s turnover. This reversed franchise system had been announced in April last year and has been tested since November.
Like a store manager
From a Western point of view, such a “reversed” franchisee is more like a store manager than like a real franchisee, but in the Russian market this could be a huge step to fully introducing the franchise system. It is very possible that entrepreneurs want more after experiencing this system’s success and turn their business into a “hard franchise”.
Merger in 2006
The rapidly growing X5 group was formed in 2006 by a merger of soft discounter Pyaterochka and supermarket chain Perekrestok and was expanded in 2008 with hypermarkets Karusel and again in 2010 with Kopeyka. 20% of the chain’s 3400 stores are managed by (hard) franchisers, The group wants to use the new system mainly to expand in the region around Moscow and in the city of Nizhny Novgorod, 400km to the east of the capital.
Paul Martins joins
These expansion ambitions also reflect in changes in X5’s management team, as the group announced that Paul Martins, ex-Casino and now Tesco, will join the board of management next Saturday as commercial director.
