The former Soviet Union was a frightening frontier for expanding businesses in the early- to mid-1990s. The former communist country was experiencing growing pains as it left behind decades of closed existence and began embracing a new economy built around more of a free market-based environment. And it was just this setting that Jake Weinstock and Paul Kuebler dived into headfirst.
"I moved to Russia straight out of college in 1994," says Weinstock, who's now 36 years old. He knew the language and had taken a marketing job with Ernst & Young in Moscow. Likewise, Kuebler found himself in similar circumstances, living and working in the new Russia. It wasn't long until Weinstock and Kuebler met up with Vladimir Grumlik, a Russian entrepreneur who had helped open Nike stores among other endeavors in his native homeland. Together, the three began a relationship which eventually led them to the doors of the Gold's Gym franchise.
"We believed there was a niche in Russia for a health-themed workout facility and Gold's did have somewhat of an international recognition," says Weinstock on how they arrived at their decision. So, borrowing money from friends, families, and the remainder from financial institutions, the team opened its first Gold's Gym franchise in Moscow on Thanksgiving Day of 1996.
In a market that was essentially devoid of health clubs and fitness centers, Weinstock says there was an initial rush of early success followed by a cooling period brought on by some economic turmoil in the late 90s. But those tenuous times were followed by a period of growth and expansion. Therein lays one of the fundamental lessons the partners came to understand.
"We learned quickly that it's important to create and maintain a stable business that can endure ups and downs in the market," says Weinstock.
Indeed, international business ï¿½" especially franchising - can be tricky. There are often cultural barriers, language barriers, and governmental barriers among other challenges.
Weinstock says that's why they teamed up with Grumlik and rely on other partners who are locally based. "It's incredibly important to have the right partners on the ground wherever you have locations. You want local relationships and local market knowledge," he says.
And building relationships internationally is something that Weinstock and Kuebler have gotten pretty good at over the last dozen years. They just recently opened their second Gold's Gym location in Moscow, and they have six more locations spanning the massive country. Additionally, they have opened locations in Budapest, Hungary, Prague, Czechoslovakia, and are on course to open a location in Warsaw, Poland, and in Spain and Portugal. Their operating gyms are now serving more than 20,000 fitness-seeking customers.
Weinstock says that most international franchising is far from the McDonald's one-size-fits-all approach. "You have to really identify what the local customer wants and try to adapt in some way." For example, he describes how they discovered that their Russian customers desired something much like their traditional banya ï¿½" where they sit in an extremely hot sauna and follow that with a dip in a cool whirlpool. Not something a Gold's Gym would offer in America, but Weinstock and Kuebler do in Russia.
There were other challenges, like operating a business under the watchful eye of a foreign government. Says Weinstock, "We got to work identifying and getting to know the key people, made sure we properly paid taxes and fees, and really kept an eye on the changing and emerging economy in Russia."
Constant communications overseas, and throughout a country the size of Russia, not to mention central and eastern Europe, can be challenging and expensive. "We've definitely benefited from technology like email and Skype for communicating and keeping everybody on the same page," says Weinstock.
According to Weinstock, even the very fundamental concept of franchising itself can often be difficult to explain and garner buy-in for in some foreign countries. Again, establishing relationships and building trust is imperative.
But ultimately, it's been a solid ï¿½" and lucrative - business decision for the two Americans and their Russian ally. Weinstock says he spends most of his time working the development angle, looking for new territories and locations. Kuebler is more of the day-to-day CEO, the operations guy who keeps an eye on the business. Weinstock and Kuebler travel quite a bit but Grumlik is always on the ground in Russia keeping them up-to-date.
International franchising is complex and offers its own unique set of challenges. But Weinstock believes that if you focus on local markets and culture, partner with the right people at the right locations, and tweak the concept to address local customer desires, it can be a profitable endeavor.
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