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 / Second Quarter 2001 / Issue 23(originally published by Booz & Company)


Recent Studies

  • Choose partners carefully. In 1990, the Canadian branch of the McDonald’s Corporation became the first foreign company to open Russian franchises. Because every Russian McDonald’s is a joint venture with the city of Moscow, the government has a vested interest in ensuring that McDonald’s operations work well and are in good locations. By contrast, Subway, the U.S. sandwich shop franchise (which is no innocent abroad; it has more than 14,000 restaurants in 76 countries), opened its first and only Russian franchise in 1994 with an unreliable partner. The operation was quickly shut down by police and reopened by a company allegedly controlled by Russian organized crime. This resulted in Subway’s withdrawal from Russia by 1996.
  • Think long-term investment. When Allied Domecq’s Baskin-Robbins division began to invest in Russia, it waived franchise fees for initial investors in the hope that brand loyalty would build sales, but still is counting on royalties as a source of revenue. The idea was to eventually charge fees as it developed greater consumer brand-name recognition. The firm also took the risk of investing $21 million in 1996 in a giant ice cream plant in Moscow. Today, it produces 1,000 tons of ice cream a year, although, according to company officials, it has a capacity of about 16,000 tons a year. (Potential demand is as high as 300,000 tons a year.) Baskin-Robbins is one of the most successful franchises in Russia. In 1994, it had 30 company stores and one franchisee; in 1996, this rose to 50 corporate units and 67 franchisees. It now has a total of 82 in Russia and 93 throughout the Commonwealth of Independent States.
  • Selectively adapt to the local market. Franchisers should know they can’t offer economically struggling Russian consumers the same selection of goods that Western customers can buy. But they must also resist the tendency of Russian businesspeople to alter existing business models. Although Allied Domecq is very successful with its Baskin-Robbins line, it ended its attempt to bring Dunkin’ Donuts franchises to Russia in 1999, because the Russian branches sold vodka and meat patties in violation of the franchise agreement.

The economic and political risks of the Russian market may deter investors, but that’s good, observes a vice president of Allied Domecq. He says companies that make a “preemptive move” can lock out competitors later. And Professors Alon and Banai share this view: “The payoff is great for franchisers that are willing to endure the economic cycles, political instability, and social threats of this hybridized emerging market.”

The 6-to-6 Workday
Thomas M. Beers, “Flexible Schedules and Shift Work: Replacing the ‘9-to-5’ Workday?” Monthly Labor Review, Bureau of Labor Statistics, June 2000.

Flextime was an important workplace innovation of the 1980s, but Bureau of Labor Statistics (BLS) economist Thomas Beers suggests that most workers’ schedules are not that flexible. For many, the workplace is no longer a 9-to-5 job, but nearly all workers still have to be in the office sometime between 6 a.m. and 6 p.m. “The ‘9-to-5’ workday,” Dr. Beers reports, “does not appear to be in jeopardy of fading from its prominence in U.S. workplaces.”

He analyzes a 1997 BLS survey that is the federal government’s latest effort to calculate how much time Americans spend on the job. According to the survey, 27.6 percent of the workforce, or just over 25 million people, have some control over when they begin and end their workday. College professors have the most flexible hours, while machine operators are most likely to punch a time clock.

The BLS researchers found that there are classes of workers who have flexible hours, but would prefer more regular ones — suggesting that although flextime or irregular hours are becoming a necessity for some people, it may not be the way they’d like to live. Only 6.1 percent of those who worked an irregular shift received better pay, and 4.1 percent said they worked odd hours in order to manage child-care arrangements.

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