Pizza chain Sbarro in Russia will decrease three times

The logo of Sbarro pizza

That “G. M. R. planet of hospitality” and the American Sbarro launched a procedure for the termination of the concession agreement, RBC announced President and co-owner of the Russian holding company Merab Elashvili. When the procedure is complete, the restaurateur does not disclose, citing the confidentiality terms in the agreement.

G. M. R. planet of hospitality runs on the master franchise of Sbarro 88 restaurants, including 54 points — their own and other developing partners subfranchise. At Sbarro accounts for half of the revenue a restaurant holding company, which in 2015 declined to 7 billion rubles from 5.5 billion rubles in 2014, said Elashvili.

The main reason for the differences, according to him, was menu and recipe dishes. After Russia imposed an embargo on food imports from USA and EU countries, and that is where the “G. M. R. planet of hospitality has purchased 70% of raw materials for their restaurants, management of the Russian holding several meetings with American partners, and suggested menu with local products. Under the terms of the contract, to change the menu only with the consent of the franchisor.

“We hoped that partners will hear us, but since this did not happen, we began to prepare for the termination of the contract,” says the restaurateur. The fact that yesterday cost 30 RUB, turned into 60 RUB.”, he continues, but to increase the price proportionally not because of the high competition for a year and a half of sanctions on Russian Sbarro has increased the cost of meals is only 10-12%.

In the U.S. Sbarro to a request to RBC did not answer.

Restaurants Sbarro, owned by G. M. R. Planet of hospitality” will be converted to other formats, this has already started to notify landlords, says Elashvili. The holding company owns restaurants “Holy smoke”, “Oriental Bazaar”, Viaggio and “Little Japan”, lapchine YamKee and cafe “Cafetto”. Management of subfranchise American Sbarro will take over, said the restaurateur.

According to the Executive Director of the Russian franchising Association (RAF) Yuri Mielniczenko, penalties for early termination of the contract with the American partner does not succeed if were not violated other arrangements. “Now all restaurateurs are in a difficult economic situation, the market sagged seriously, therefore, the rejection of the franchise may be profitable, at least will not have to pay royalties,” says Mielniczenko.

Because of the crisis, traffic in restaurants Sbarro declined, the average check dropped by 20-30%, Elashvili said. In addition, in mid-2014, some banks refused to renew G. M. R. Planet of hospitality” line of credit, whereby the company has accumulated a cash gap, he says. According to SPARK, long-term and short-term obligations, OOO brothers and company” (the main legal entity of the network Sbarro, part of the holding “G. M. R. planet of hospitality) in 2014 amounted to 5.6 bln RUB, later data have not been published.

Problems of the Russian Sbarro became known in December 2015, when the employees staged a spontaneous strike, demanding to pay them months of salary arrears. Many restaurant staff have not been paid for seven months, the average debt to each of them at that time amounted to 150 thousand rubles, wrote the newspaper “Kommersant. The Fes and the Moscow office of public Prosecutor has begun check. In Sbarro explained the arisen problems a ban on the import of products from the EU, the jump in the dollar and the growth in rental prices in shopping malls.

Elashvili acknowledges that the amounts payable to employees at the end of 2015 reached 15 million rubles Now she was reduced to RUB 2 million and will be repaid by September, plans businessman.

Global problems

Company Sbarro was founded in 1956 by a family of Italian immigrants Sbarro, and in 2007 absorbed by the private equity Fund MidOcean Partners. In recent years, Sbarro has been in bankruptcy. In 2011, she managed to convert into equity about $200 million from $375-millionnov debt. Creditors, the largest of which was the Ares group, got 50% of the business.

Three years later Sbarro again filed a bankruptcy petition under article 11 of the bankruptcy Code of the United States. Having at the time of bankruptcy protection from creditors, the company continued its activities and has developed a crisis management plan. Later 98% of creditors had previously agreed to exchange debt network, have reached $140 million for a controlling stake in the restructured company.

Creditors, including Apollo Global Management, Babson Capital Management and Guggenheim Investment Management, Sbarro has provided a loan of $20 million to Finance restructuring. To increase profitability, the chain closed 155 of its 400 outlets in North America. Today the global network Sbarro recites about 800 points in 33 countries.