Background:

Sushi-bar was one of the most profitable businesses in the fast food industry as its opening demanded the minimum starting investments, being comparable only with ‘coffee’ (the price of opening one coffee house was about US$70,000). As a rule, the organization of fast food restaurant requires a total area of 50–200 m2, with the average volume of investments being $900–1500 per m2 a year. The monthly profit of one average restaurant/bar is around $10,000.

In late 2002, Yevgeny Kadomsky and Mikhail Tevelev, decided on opening a restaurant with an original style that offered Japanese cuisine. Their new approach would attempt to leave behind all traditional stereotypes of Japanese restaurants. Dve Palochki (Two Sticks) was founded in St. Petersburg in 2003. By 2008, twelve restaurants were opened under the brand in both the historical center and new residential areas of the city. Every day Two Sticks restaurants served over four thousand guests, with an average bill of 450 rubles ($15). Their appeal was different from their competitors’ because they offered an unusual atmosphere and original advertising campaign. In 2008, the company announced ambitious plans to open three hundred restaurants in Russia’s biggest cities and expand abroad within five years. Some of them were located in the city center, while others were farther uptown on busy prospects. In 2008, the chain served an estimated 150,000 visitors a month, with a total turnover of $30 million.

A restaurant’s atmosphere which made Two Sticks different from other restaurants was well known to be created by its personnel and characteristics. This is why the company management paid enormous attention to recruitment. Employees were encouraged to build strong relationships with each other.

Another direction of the campaign was the development of a uniform for the waiters and waitresses. When the uniform campaign started, the marketing department decided to avoid dullness and monotony, but keep a unified corporate style. The uniform had to be identical but individual

Problems:

In the middle of the first decade of the 21st century, the food service industry was growing by 20–30% a year in Russia. New restaurants in the big cities were hard to open: rent had increased significantly, causing restaurants to become unprofitable.

The chain’s marketing director, Yakov Pak, understood that maintaining the same level of service quality was imperative during the expansion. However, the challenge was to offer the same unique atmosphere in each and every restaurant.

When discussing the problem of differentiation in the market, Yakov Pak said, “Russian people still see no difference between sushi bars and Japanese cuisine restaurants.” While the quality of sushi and rolls in all the Japanese cuisine chains was almost equal, a key to success in the market was ingenuity.

Although food and service standards in Japanese cuisine restaurants were leveling out and were expected to become fully equal by 2012–14, in 2008 the quality of food and service was not the same in different restaurants. However, Russians were not as sophisticated as Americans or Europeans and often chose lower prices over quality of service.
The company also investigated countries neighboring Russia. The first restaurant abroad was to be in Kyiv, Ukraine. The executives started negotiations to rent three premises in the Ukrainian capital. They were to be financed by reinvesting the company’s own money and taking external loans.
Simultaneously, the company started planning its expansion to Sweden. Having visited Stockholm, the executives initiated a project to enter the Swedish market through a series of meetings with Swedish business people on possible cooperation, real estate agents to find appropriate premises, and recruitment agencies and law firms to support the operations in Sweden. However, having thoroughly studied the perspectives in the Ukrainian and Swedish markets, the company decided against both. Unlike Europe, Ukraine could not provide a valuable international experience. In Sweden, the major drawbacks were very high investment costs and little interest in Japanese cuisine.

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