Cofix has informed the Israeli Stock Exchange of an agreement it has reached with a group of investors, according to which the two will open a network of branches in Russia. The Israeli company plans on entering the Russian market in three stages. In stage one, three self-operated stores will be opened. In stage two, 300 branches will be franchised in Moscow; and in stage three, 700 additional branches will be franchised across all of Russia. According to the agreement, the branches will sell coffee, soft drinks, pastries, sandwiches, and the like at a fixed price.
Cofix has stated that its subsidiary, Urban Cofix, has signed a deal with a private company owned by a group of Russian investors, led by Satesh Melwani and Mikhail and Grigory Perchersky.
Urban Cofix and the investors will establish a private company in Cyprus, with Urban Cofix owning 36.44 percent of said company and the investors owning 61.56 percent. The remaining 2 percent of the company will be owned by an additional investor. According to the company's business plan, the Cypriot company will operate in Russia similarly to how Urban Cofix operates in Israel.
"According to the agreement, the investors and Urban Cofix will commit to providing the Cypriot company with funding of up to $1 million for the purpose of operating the coffee shops in Russia, with the investor putting forth 85 percent of the initial investment, while Urban Cofix putting forth 15 percent." In case additional funding is needed, the investors and Urban Cofix will supply the funds at an identical 85 percent-15 percent rate, up to the sum of $1.5.
As stated, Cofix's prices will be cheaper in Russia. Cofix CEO Haim Aharon told Ynet the reason for this is due to general price levels in Russia being lower than in Israel. "Socio-economic disparity is very high there. Much higher than in Israel," he said.
Are there already locations in mind?
"The branches will open in commerce centers and train stations, but there are no specific locations yet. We will establish three pilot branches, train the teams, see how it works, and then go for it. All three will be owned, and later on we'll operate on a franchising model."
What are your sales expectations?
"2,000, 2,500 items per shop. That's our expectation, that's the base."
Did you contact them or did they contact you?
"Someone mediated. They saw the concept in Israel and liked it. We're contacted by a lot of people from all over the world. We don't get back to everyone everyone."
They could have copied the business model.
"We registered Cofix as a trademark in several countries, but they could have copied the concept, creating a variation that wouldn't be considered copying in court. But serious people want to know how it works, what the system is, what the information package behind the concept is. We've accumulated knowledge here. Establishing a chain without our assistance would be hard."
Cofix Vice President in charge of Commerce and Purchasing Hagit ShInobar, who also owns 17 percent of the company, doesn’t have an accurate prediction of Cofix's Russian sales. She did, however, tell Ynet, "
We expect similar performance to that in Israel. Sales of fewer than 500-600 items per day would be considered a failure."
Will the branches be operated by franchisees?
"In the beginning, the branches will not be operated by franchisees, but by the partnership we established with the local company, but later on, yes, they'll be operated by franchisees. At the start, we'll only be bringing in the original Cofix concept, leaving out Cofix Bar (a fixed-price bar serving alcoholic drinks. —ed.) and Super Cofix (a fixed-price supermarket —ed)."
You announced that you'll be opening 300 branches. What will be the pace?
We'll start like we did in Israel, with 3 pilot branches, then continue with 12-150 branches in Moscow, and then we'll see."
The menu will be different.
"It will be adjusted to fit the weather and local tastes."
You're religious. You won't keep kosher there.
"Of course it won't be kosher."
Do you intend to expand into other countries? Bordering countries, for instance?
"Yes, we plan on expanding, but not necessarily to countries in the Russian area. That's also a kind of pilot for us: Stepping outside and seeing what happens. In Israel, our state, thank god, is (knocks on wood). We have 125 Cofix branches right now, and 17 Super Cofix branches, the latest one having been opened on Sunday in Kiryat Shmona. We continue to grow, rise, and develop."