BDS UkraineBusiness Development Solutions

November 2012

Restaurant business development

‘Market Scan’ Report

I. Fast food market in UkraineII. Premises for FF restaurants: General

information

III. Available and recommended Locations: commercial centers

IV. Available Locations: buildings

V. Business for a foreign investor: recommendations for start

VI. Restaurant business in Ukraine: first steps

VII. Restaurant with Spanish cuisine

Agenda

Currently Burger King restaurants are not present in Ukraine.

However the company registered its logotypes in Ukraine on September 26th, 2012 while the request was given on October 15th, 2010*.

The following was registered: “Burger King” ("Бургер Кинг”), “Do it your way” ("зробы по-своему”), “Home of the Whopper” (“Дом Воппера”) and “ВК”.

*According to the government organization “Ukrainian Institute of industrial property”.

I. Fast food market in Ukraine: general situation

Fast food market in Ukraine is not competitive yet and experts admit that it grows faster than European FF market.

At this moment only McDonald`s и Domino`s Pizza have strong positions on the local market and they compete with local FF brands. McDonald’s has 72 restaurants in 22 cities of Ukraine with 70 mln. customers annually.

KFC (Kentucky Fried Chicken) are registering in Ukraine now, the network of the restaurants must be opened already this year in a new Commercial Center “Ocean Plaza”.

I. Fast food market in Ukraine: general situation

FF market capacity is now around 650-800 mln USD annually. It is growing every year by 15-20%. Market is occupied now by 40%, which proves that there is a good potential for new players.

I. Fast food market in Ukraine: general situation

To start a FF restaurant requires on average 120 000 USD investment (excluding cost of franchise) in case of rent and 300 000 usd and more for purchasing and reconstruction the premises ready for restaurant business. Additionally from

50 000 to 80 000 USD annually is required for its promotion.

However due to big turnover the initial investments are quickly returned – within 2-4 years as the profit of such business is from 10 000 to 30 000 usd per month NET (according to the experience of current successful trademarks).

The market will start growing much faster as of 2014.

I. Fast food market in Ukraine: finance estimations

General information

II. Premises for ff restaurants

II. Premises for ff restaurants: general information

There is a shortage of suitable premises or lands for new building constructions. Process of land acquisition is 3 times longer than in Europe

That is why FF restaurants are mostly placed in commercial centers.

However many FF networks are not satisfied with placement in commercial centers as number of visitors declared by the commercial centers is smaller than in reality, which is reflected on the profit of business.

II. Premises for ff restaurants: general information

It is not yet popular to open FF restaurants in the non-central areas: lack of customers, which leads to short profit.

The only brands available there are McDonald's and Shvydko (local FF net).

Commercial Centers

III. Available and recommended Locations

Commercial centers for the fast food restaurant

Ocean PlazaBrand new commercial center opened on Nov 20th, 2012.

КFC will be opened in the center very soon.

Cost of rent: 55 USD per m2Utilities (incl. electricity&water) 10 USD per m2Marketing: 4 USD per m2Total: 69 USD per m2 (net)

Commercial centers for the fast food restaurant

Promenada centerRent square: 150 m2, 45 m2 kitchen,105 m2 for seatsRent cost: 30usd per м2Utilities: 12 usd м2Total cost: 42 usd per m2 (net)

Commercial centers for the fast food restaurant

Metrograd

Underground shopping center, central location.Rent square – 110 m2Cost of rent – 37 usd per m2Utilities – 10 usdTotal – 47 usd (gross)

Commercial centers for the fast food restaurant

MagellanNon-central shopping center placed in a highly populated area.Rent square – 118 m2 (for kitchen and seats)Cost of rent – 30 usd per m2Utilities – 10 usd (plus electricity supply meter’s results monthly)Total – 47 usd (gross)

Buildings

IV. Available Locations

Area close to city center170/1b Horkogo Str., 480 м2.Ground floor, basement, sun

porchAvailable documents for catering usage (Aкт ввода в эксплуатацию под предприятие общественного питания)

What is near: Lybidska metro station, Fourshet, Silpo, Ocean Plaza - new Commercial Center.

Planned customers capacity -150 seats.

Sale price – 860 000 USD (1791 USD per м2)

Rent –8 640 USD (18 usd per м2)

IV. Available Locations: #1

Sale of land and architectural project for construction of restaurant/store

Location – non central (Left bank of Kyiv), but well populatedSquare for building - 660 м2 Land – 3 hundred м2

Project of facade 3floors building, not far from “Pozniaki” metro station, opposite “Alladin” commercial center. Possibility to organize parking area.

Sale: 150 000 USD

IV. Available Locations: #2 (non-central area)

A fully supplied and working restaurant ready to be rented, currently named “Shtany”. Very central location.11 Pushkinska Str. (In the yard), 131 м2.(50 seats)Ground floor.Available documents for catering usage

What is near: Khreshatyk Street, Russian Drama Theater

Rent price - to be negotiated with owners if you are interested in the location.

IV. Available Locations: #3 (city center)

Bohdana Khmelnytskogo street, one block from Khreshatik

Recommendations for start

V. Business for a foreign investor

The most typical way for a foreigner to start business in Ukraine is to become a founder of a Ukrainian company with foreign investments (may be up to 100% foreign investment).

Next step is to appoint a Ukrainian director, whose responsibilities and decision power can be limited depending from the desire of the foreign founder to control the business.

The director should be responsible for relationships with all authorities in order to get necessary permissions to start the business.

V. Business for a foreign investor

First steps

VI. restaurant business in Ukraine

Step 1: creation of architectural project of the premises that stipulates all equipment placement, water and electricity supplies, etc. The document should be ordered to a Ukrainian architect according to the local standards to be approved by local authorities.

Cost of the architectural project is around 1 000 USD.

VI. Starting restaurant business

Step 2: getting necessary approvals of authorities. We should consider official and non-official expenses.

Official: Handel patent for trade activity – (depends from area)

7 to 40 USDLicense for retail of alcohol - 215 USDLicense for retail of tobacco goods – 110 USDFull list of official payments should be discussed with a lower for

precise business planning.

Non-official payments (may be more or less depending on different factors):

sanitary station – about 1 000 USD fire security – about 1 000 USD

VI. Starting restaurant business

General recommendations

VII. Restaurant with Spanish cuisine

There is a number of restaurants that include Spanish meals together with Mexican, American and so on.

However there is no any restaurant yet with specifically Spanish cuisine.

We believe that typical ‘home’ restaurant that we often meet in any Spanish city or town made from the heart may stand out among many Ukrainian restaurants.

VII. Restaurant with Spanish cuisine

… please contact us:

Oksana SamoylenkoBDS Ukraine Executive Director

E-mail: bds.ukraine@gmail.comMob: (+38 067) 4567 455

for the next steps…