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McDonalds to Invest $100 Million and Fully Localize Production in Russia

Also says is ready to hand over 20% or restaurants in Russia to local partners

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MOSCOW, January 25. /TASS/. McDonald's may increase investment in development of its Russian business to almost 9 bln rubles ($112 mln) in 2016, president of McDonald's Russia Khamzat Khasbulatov said on Monday.

"Our last year’s capital input was higher than we announced - around 8 bln rubles instead of 6 bln (rubles). This year it will be even higher by around 10%," he said.

Thus, the company’s investment in developing its Russian business may total around 9 bln rubles.

In 2015, McDonald's opened 59 new outlets in Russia versus 73 in 2014.

Last year Khasbulatov said he expected single-digit growth of profits in Russia in 2015, down from double-digit in the previous year.

"We finished the year better than expected, but sanctions affected the margins of Russia’s business," president said on Monday.

According to the top manager, in 2015 the company raised prices in its outlets due to the devaluation of the ruble, though the growth was below inflation.

In 2016, McDonald's plans to open around 60 own restaurants and develop franchised business.

MOSCOW, January 25. /TASS/. McDonald's plans to fully cross to locally-made products for its restaurants in Russia, president of McDonald's Russia Khamzat Khasbulatov said on Monday.

"We intend to fully localize production in Russia, not because of sanctions but those being our long-standing plans," he said.

According to Khasbulatov, the company will fully replace imported chicken and cattle meat with Russian analogues within 2 years and will have its own potato production in Russia by 2017.

"The [joint] project with Belaya Dacha is in force. They promise we’ll receive the first product by the end of 2017," Khasbulatov said, adding that McDonald's is not in talks with YugAgroHolding on similar project.

"Russia is still one of the most interesting regions for investing and opening new outlets," he said.

MOSCOW, January 25 /TASS/. McDonald’s will step up its development on franchise in Russia and is ready to hand over a considerable part of restaurants to local partners to step up the company’s expansion in Russian regions, Khamzat Khasbulatov, McDonald’s president in Russia, told TASS on Monday.

Until recently, the company preferred to develop independently in the Russian market. Local partners ran just a few restaurants under the McDonald’s brand. By comparison, 80%-90% of the McDonald’s chain develops on franchise in Western countries, Khasbulatov said.

"I think that if the number of franchise outlets amounts to 20% from the total number of Mcdonald’s restaurants in the next 3-5 years, it would be a good figure and a good starting point. This figure, however, is not our task or goal. We will continue opening restaurants and will concurrently attract additional partner resources," the top manager said.

It is vitally important for the company to establish cooperation, which will encourage the partners to open a huge number of restaurants in Russian regions, in which McDonald’s has an interest, Khasbulatov explained. According to him, this scheme will enable McDonald’s to use the partners’ financial abilities to expand the chain.

"Besides, it will give us an opportunity to optimize our administrative expenses. The fiscal component is also important: the corporation receives royalty [a payment for the use of its brand and format]; the partner receives dividends and the system on the whole - new volumes and opportunities," Khasbulatov said.

At present, McDonald’s is in talks with several potential partners and hopes to have a clear impression by the second half of 2016 with whom and according to what scheme it is going to cooperate, Khasbulatov stressed.

McDonald’s has been working in the Russian market for more than 25 years. It has 543 restaurants across Russia. In 2012, McDonald’s struck a deal with the Rosinter holdings that gives Rosinter the right to open McDonald’s restaurants at transportation hubs. Rosinter develops two such catering places and plans to open another 2 or 3 cafes in 2016, Khasbulatov reported. In 2015, McDonlad’s expanded a circle of his partners having signed an agreement with the OOO Gid company, which will be able to open restaurants under the McDonald’s sign in Novosibirsk and other Siberian cities.

In 2015, McDonald’s opened 59 of its own restaurants in Russia and plans to preserve this pace of enlargement in 2016. McDonald’s may invest almost 9 billion roubles (112.8 million U.S. dollars) in developing its business in Russia this year.

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