Major Russian coffee chains are preparing to enter the United Arab Emirates (UAE) market using a franchise model, a strategic decision influenced by the complex economic landscape of Dubai.
The 'Shokoladnica' chain, one of the leading coffeehouse brands in Russia, has recently signed an agreement with an agent tasked with finding suitable partners for expansion in the UAE. According to Oleg Podgorniy, general director of 'Shokoladnica', this franchise model was selected after thoroughly analyzing the specifics of the Dubai market. The costs associated with opening independently would have been significant, particularly due to high rental rates encountered in the bustling city.
"The franchise model for 'Shokoladnica' was chosen after analyzing the specifics of the Dubai market, where opening independently would require significant costs due to high rental rates," Podgorniy stated. He acknowledges that the UAE market presents high competition, yet he views this entry as a notable achievement for the brand.
Meanwhile, another major player, 'Kofemania', is also gearing up to launch its first restaurant in the UAE. However, a representative from 'Kofemania' indicated that the restaurant in Dubai will not be opening in the immediate future, implying that they are still in the planning stages. "The restaurant in Dubai will not launch in the immediate future, so talking about it is premature," the representative emphasized.
The keen interest from Russian companies in the UAE market has been on the rise, particularly since the influx of Russians moving to Dubai in the spring and autumn of 2022. This shift has opened new opportunities in the region, fostering business ventures and partnerships.
According to a report by the consulting firm Nikoliers, 19 Russian companies entered the UAE market in 2024. Notable brands included 'Zolotoe Yabloko', 'Letual', Frank by Basta, Loona, and Ribambelle, showcasing a diverse range of industries looking to tap into the growing market.
However, despite this initial surge in interest, the activity of Russian companies in Dubai has recently seen a downturn. Andrey Kosarev, a partner at Nikoliers, pointed out that this decline is attributed to soaring rental rates and a shortage of suitable commercial spaces. He noted, "According to Nikoliers partner Andrey Kosarev, activity of Russian companies in Dubai has decreased due to rising rental rates and a lack of suitable premises."
Challenges persist, particularly regarding the costs associated with establishing a business in Dubai. Recent reports indicate that in the third quarter of 2024, rental rates for shopping centers in Dubai surged by an average of 25% compared to the previous year. Nikoliers highlighted the significant hurdle that these rising costs present for new entrants to the market.
"In the third quarter of 2024, rental rates in Dubai shopping centers increased by an average of 25% compared to the previous year," the firm concluded, reflecting the heightened financial landscape businesses must navigate.
As the Russian coffee chains position themselves to address these challenges, the UAE market remains an intriguing yet competitive arena, showcasing the dynamic interplay between opportunity and risk inherent in international expansion.
