Unirest, which owns the master franchise for the Rostic’s and KFC brands in Russia, is buying out the franchisee’s business

Unirest, which owns the master franchise for the Rostic’s and KFC fast food chain brands in Russia, continues to buy up the businesses of its counterparties. According to Kommersant’s information, the company is agreeing to buy out about 100 KFC establishments managed by AK Russia LLC. The market expects further consolidation in this catering segment through acquisitions of franchisees.

The owner of the KFC and Rostic’s master franchise in Russia, Unirest LLC, is negotiating the acquisition of the business of its franchisee AK Russia LLC, two sources told Kommersant. Unirest declined to comment. AK Russia did not respond to Kommersant’s request.

The rights to develop the KFC brand in the Russian Federation until October 2022 were held by a subsidiary of the American Yum! Brands, which announced its departure from the country due to the military conflict between the Russian Federation and Ukraine. The business was bought out by the Izhevsk franchisee of the network, Smart Service Konstantin Kotov and Andrey Oskolkov, renaming the company Unirest (see Kommersant, October 25, 2022). In April 2023, the company began renaming its KFC locations to Rostic’s. General Director of Unirest Tatyana Shamanskaya previously stated that the complete rebranding of all 1.15 thousand KFC establishments will be completed by the end of the first quarter of 2024.

But not all franchisees wanted to work under the Rostic’s brand. It was Hey Kay Russia, which manages about 100 establishments, that stated that it does not plan to rename its outlets, most of which can use the KFC brand until 2035 (see “Kommersant” dated September 29, 2023). Then experts told Kommersant that if the name was changed to Rostic’s, the establishments’ traffic could drop by 20%.

According to Kartoteka.ru, in 2022, AK Russia’s revenue increased by 45%, to 8.6 billion rubles. It also states that 90.01% belongs to the Cypriot Lerondale Assets Ltd, among the ultimate beneficiaries of which the Vedomosti newspaper previously named the main owner of the Shokoladnitsa group, Alexander Kolobov. But he left the business, transferring his share to partner Siman Povarenkin, a Kommersant source in the market says. Another 9.99% in AK Russia belongs to Sberbank Investments.

After Unirest received a master franchise, it began to actively absorb its franchisees: for example, in 2023, it closed a deal to acquire the Polish AmRest, which manages 215 KFC restaurants in the Russian Federation. Initially, this business, like AK Russia, was claimed by structures associated with the Sindika group of Senator Arsen Kanokov, says a Kommersant source in the market. Sindik declined to comment.

Many franchisees are not willing to pay royalties for the Rostic’s brand as much as they paid for KFC, and are putting their business up for sale, while the franchise owner has a priority right to buy out, explains Infoline-Analytics CEO Mikhail Burmistrov. He estimates the amount of the transaction between Unirest and AK Russia at 3–4 billion rubles. But considering that “the owner of AK Russia is a legal entity from an unfriendly jurisdiction (Cyprus offshore.— “Kommersant”)”, the legal commission can approve the deal subject to a serious discount. At the same time, the expert believes that the deal may push other Unirest franchisees to sell the business.

VTB structures will finance Unirest’s acquisition of AK Russia, says a Kommersant source close to one of the parties. The bank participated in transactions for the purchase of business by Smart Service from the American Yum! Brands and AmRest, clarifies another Kommersant interlocutor. VTB “does not comment on client relationships.”

Considering that VTB structures participate in International Restaurant Brands LLC, which manages more than 380 Rostic’s restaurants, after closing the deal with AK Russia, the state bank will indirectly control most of the chain’s establishments – about 800 points, Kommersant’s interlocutor adds. The VTB structure already owns 19.98% in the Russian business of Burger King.

Daria Andrianova