Who would have believed it 20 years ago? Russia back then was still a part of the Soviet Union, and was experimenting with private enterprise and capitalism for the first time. And when they opened up their country for foreign capital, the Golden Arches were about the first customers popping in. It made headlines around the world: McDonalds fast food in Pushkin Square, right in front of the Kremlin. What was most surprising though, was how popular McDonald's fast food was in Russia. On average, each Russian McDonald's services nearly a million visitors each year. In the US on the other hand, each outlet services barely half that number. Americans could justly swell in pride to know that the American fast food chain has held Russia's hand and led it through its first several steps in capitalism.
McDonald's business model everywhere in the world, has to come in with the capital, the store design and the recipes, and source everything they need from the local suppliers. It usually sits very well with the local government in any country, to see a threatening foreign company come in and give the local economy a big boost by buying from businesses and farms all around. In India, for example, McDonald's looked high and low to find a farm that grew exactly the right kind of potato for their fries. It took them a year to zero in on the right drawer; until then, they imported frozen french fries from down under.
The only problem in Russia was that the country had no private business. Who would they turn to, to make the three hundred different ingredients that go into McDonald's recipes? Who would make the filling that went into their apple pies, or print and wax-coat the wrapping around each hamburger? And how about the straws and cups? Who would want to make the special ketchup or sauces, when the local government tomato growers' collectives had done nothing for generations other than make the one slop they always had? So McDonalds fast food in Russia had to come with a huge McFactory that made everything that went into the recipes, until they could coddle and cajole the local farmers and entrepreneurial people, to hedge their businesses to McDonald's needs.
And did this ever work! Dozens of private businesses around the country have sprung up completely dependent on the business that McDonald's brings them. There are soon to be 300 McDonalds fast food outlets in that country. And the demand for lettuce, tomatoes, cheese and dozens of other products, has taught local growers and factory owners to make and supply produce and condiments to Western tastes. And they have become so prosperous on McDonald's contracts that they have expanded into exports, and original products for the supermarkets of their own.
But there is still one thing in Russia that isn't done the McDonald's style at all - and that is franchising. All of the fast food outlets in the country are run by McDonald's themselves. It's been 20 years, and the company has still been worrying about whether enough ketchup has been sourced for the next day's sales at all the outlets, and whether the oil has been changed in the fryers. Well, that should be the next step for capitalism in Russia then, McDonalds fast food style: the franchise model. Once that happens, just be sure to stand back as you watch it take off.