Pyaterochka Franchise Trends and Growth in 2023–2024 (US/Canada audience)

— The franchising market in Russia expanded in 2023 compared with 2022. What explains this shift?

– Several factors come into play. First, the profitability of franchises in the market attracted attention. Some investment tools became invalid during 2022–2023, while both entrepreneurs and investors continued seeking new ways to place capital. Franchising offers a path to growth through a proven business model, reducing some of the risks tied to launching a new venture.

Second, lower-entry franchises are thriving. Over the last five years, the number of franchise brands has risen while the minimum required investment in many networks has decreased. There are more people with savings up to 5 million rubles than with capital above 10 million, so this trend helps explain the popularity of franchising.

Third, growth is led by the largest segments in the franchise market. The top three by annual turnover are the restaurant sector, FMCG retail, and medical services. Among these, retail has shown consistent year-on-year revenue growth, reflecting the ongoing daily demand. Entrepreneurs are increasingly investing in such franchises, notably the Pyaterochka network.

In general, franchising has become an alternative to stock market investing, though it differs in important ways. The stock market often involves passive participation.

If a person invests in a franchise, particularly the Pyaterochka franchise, involvement goes beyond money. The partner typically manages the store themselves or hires a management team. As a result, the franchise tends to attract individuals with managerial experience. Senior managers from large firms, who have capital and experience, often see franchising as a way to take a new step.

— Looking specifically at Pyaterochka, what were the notable franchising developments in the last year?

— The franchise network grew by 89 stores in 2023, a 38% increase from 2022 and the largest annual expansion in Pyaterochka’s franchising history. Notably, about one third of these openings came from new network partners.

Plans for 2024 aim to push further ahead. The Pyaterochka franchise network currently totals 330 stores, with a goal to double that number by year-end, effectively quadrupling openings relative to the previous year.

— In the past two years, several major brands withdrew from Russia or paused their own franchise activities. How has this reshaped franchising?

“Against this backdrop, many existing franchisees who previously partnered with international brands redirected attention to Russian brands. At the same time, local companies began creating their own franchise models. In 2022, more than 400 networks launched franchising for the first time. Those already in franchising seek to scale and grow, though international brands often pose constraints that are hard to overcome.

Entrepreneurs gravitate toward Russian franchises when they want more control and a broader, well-supported brand presence. The expectation is for wide brand recognition and strong advertising support, both of which reduce investment risk.

— The appeal of franchising is clear for experienced businesspeople weighing options to own a franchise versus starting from scratch. What are the key advantages and drawbacks of the franchise path?

— The main benefit is risk reduction. This matters especially to individuals with recruiting experience who lack full operational know-how. A novice entrepreneur typically brings resources and an idea but needs guidance and ongoing support.

Statistics show many startups fail in the first year due to fierce competition and the heavy time and money needed for promotion, which tightens liquidity on investments.

While building a business from an idea involves trial and error, franchising offers greater predictability. For Pyaterochka, over 21,000 stores operate nationwide, and a new partner can review regional store data and location insights to gauge potential. Brand recognition accelerates reaching the break-even point.

Franchise readiness often requires less upfront work. Franchising typically involves a 2–3 month preparation phase, while starting from scratch can demand a year or more. Competitors are always moving, and market capacity shifts, so speed matters.

These examples illustrate how engaging in a franchise can substantially reduce the risk of bankruptcy and business closure in the crucial 1–2 year window.

— How does Pyaterochka ensure quality across its franchise stores? This is about brand recognition and reputation in the end.

— The rule is simple: customers should not have to guess whether they are visiting a company-owned store or a franchise. Standard service, quality, and safety rules apply across all stores in the network.

Tools for monitoring these standards exist, including automated solutions. For instance, monthly inspections are conducted at each franchise store using a detailed checklist, covering storefront appearance and product availability. If deficiencies are found, the franchisee is asked to rectify them and the store is rechecked.

Overall, partners understand that joining the Pyaterochka franchise means representing a large brand with corresponding responsibilities.

— Is customer feedback gathered from franchise locations?

— Customer satisfaction is a key performance metric. Feedback is continually monitored across all franchise stores, and factors such as supply quality, staffing, cleanliness, and store appearance are assessed even without a physical visit.

— Can the payback period for a store be predicted?

— A proprietary method draws on 25 years of experience, data from partner and corporate stores, and location-specific factors. Population density, local housing costs, and many other inputs feed a multi-factor evaluation even before opening, enabling a revenue forecast with high confidence. The stated payback period typically runs around 36 months, with potential for 18 months in strong locations, though newer partners are often given longer estimates.

— What about partners who start with one store and later expand to multiple locations?

— This is a primary metric for assessing franchise scalability. In practice, Pyaterochka partners commonly operate several stores; the typical partner runs about five outlets, and roughly 11% manage more than ten stores.

— If an interested entrepreneur lacks retail experience but has the resources, how is the process structured?

— Active support is provided at every stage, from site selection to store renovation. Partners receive specifications, builder plans, supplier contacts, and turnkey guidance. Staff selection and training follow, with ongoing operational checklists and recommendations to optimize results. This support is especially valuable for those new to FMCG retail.

— What guidance is offered to someone choosing between ownership versus starting from scratch?

— The recommendation is to gather as much information as possible. When evaluating a franchise, consider how long the company has been in business; longevity matters because a young brand may involve more formation work. Be cautious of promises tied to refunds after a short period. An important indicator is the rate of openings versus closings; a brand that opens many stores but closes many as well signals risk. For Pyaterochka, 89 new franchise stores opened last year, with only five closures and four relocations.

— Where should an investor look for funding?

— It is wise to rely on available funds rather than seeking a loan for a first franchise. The field should genuinely interest the entrepreneur, with a clear desire to learn and grow. Pyaterochka offers support to those who share this path.

— What are the primary development goals for the Pyaterochka network in 2024?

— The focus is on improving the product and the franchise itself. Everything matters: appearance, operations, content, promotion, and market positioning. The aim is to refine the business model and sharpen partner support tools to drive steady growth.