Fast-food fight in the Caucasus

By bne IntelliNews April 11, 2012

Molly Corso in Tbilisi -

A fast-food fight between US-based rivals Wendy's and McDonalds in the South Caucasus is on the cards as Wendy's plans to expand to Georgia and Azerbaijan in 2013. The deal could also bolster Georgia's efforts to attract US and European-based brands as local franchises.

Wendy's announced it will open over two dozen new fast-food restaurants in the South Caucasus during a joint press conference with its Georgian partner, Wissol Group, in Tbilisi on April 5. The announcement was attended by Prime Minister Nika Gilauri, Economy Minister Vera Kobalia and other members of the parliament, underscoring the government's focus on securing international brands for the Georgian market. Wendy's will be the fifth large American brand to enter the Georgian market, following large franchise deals with Coca-Cola, McDonalds, Texas Chicken and Donald Trump.

David Lee, president of the American Chamber of Commerce in Georgia, noted that the franchise deal is "good news" for the country and the investment climate. "Although the government of Georgia has been highly focused on improving the business climate, there are still not enough international brands on the high street," he tells bne. "Wendy's will therefore be a highly visible and welcome addition... this deal is good news for Georgia and its reputation as a good place to do business."

The franchise deal was the result of 18 months of negotiations, Samson Pkhakadze, chairman of the Wissol board of directors, told TV programme Business Courier during an interview with Georgian media on April 5. "We are very proud to bring Wendy's to the Georgian market, where we will focus our development efforts over the next several years," he was quoted as saying during the presentation. "We are also excited that through Wendy's, The Wissol Group will bring additional jobs to our local economy. After French oil giant Total and Italian API, we expect Wendy's to become one of the most important brands in our growing business portfolio."

The Wendy's deal is Wissol's first foray into the competitive world of fast food. The group, which includes gas stations, supermarkets, real estate, advertising and football, plans to open the first Wendy's in Georgia by 2013 in Tbilisi, not far from the country's oldest McDonalds restaurant.

The partnership dovetails with Wendy's expansion and brand redevelopment: currently the second largest fast food chain in terms of sales, it still trails McDonalds and Burger King in terms of outlets. The Wendy's fast food chain is expanding far past its Ohio roots, but with an estimated 6,650 restaurants in 26 countries, it is still considerably smaller than rival McDonalds (31,000 locations).

The company's 10-year plan to open 25 Wendy's in Georgia and Azerbaijan by 2023 makes it a direct challenger to McDonalds, the reigning fast-food franchise in the region with four restaurants in Georgia and nine in Azerbaijan. Darrell van Ligten, president of The Wendy's Company, said Georgia offered a "dynamic" market for the company's growth in the region. Currently, the chain's trademark square burgers and thick milkshakes are not available in Europe, although there are restaurants in Russia.

Van Ligten, who was on hand to sign the deal in Tbilisi, noted that partnering with the Wissol Group will "play an important role" for the chain's expansion in CEE and the CIS. "Georgia is a dynamic market with long-term growth potential for the Wendy's brand, and it plays an important role in our continued expansion in Eastern Europe," he said. "We believe our great-tasting, signature menu - featuring made-to-order cheeseburgers, premium chicken sandwiches, fresh salads, French fries, chili and Frosty desserts - will appeal to Georgian consumers, who are looking for more options and greater variety with 'A Cut Above' quality."

Georgian fast food aficionados can expect a Georgian twist to the menu as well, Pkhakadze told Business Courier, a Georgian business television programme, noting that a chef has already been hired and they are working on dishes that will appeal to the Georgian palate.

Wendy's is known for going local with its menu at international locations: in Japan, where it recently reopened its restaurant after closing the country's chain two years ago, their traditional square hamburgers now boast foie gras (fat liver from ducks or geese), and the menu includes versions of local favorites like Avocado Wasabi hamburger, the Truffle and Porcini Grilled Chicken sandwich and the irini rolled cake, according to a review in Time .

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