The Czar of Crepes

By Sally McGrane/Moscow

At any of the 62 cheerful, modern, orange-and-red Teremok restaurants or 70 Teremok kiosks in St. Petersburg and Moscow--which provide an equally cheerful customer experience--teenagers in red uniforms greet customers with a smile. Then, according to highly specific instructions laid out in the company handbook, they take, prepare and deliver orders. But in a twist on the concept that the customer is king, the wait staff's salutation is sudar or sudarynia, archaic Russian terms for "master" and "mistress." Teremok's fare consists not of American-style burgers but of Russian-style blini, the traditional thin pancakes, delivered with chain-restaurant consistency at fast-food prices. For 43 rubles (less than $2), you can have a blini with butter; for 182 rubles (about $7.50), you get your fast-food fix with red caviar.

By selling traditional food instead of bite-size imports like chicken nuggets, Teremok has grown into Russia's fourth largest fast-food chain. Only McDonald's, Rostik's-KFC (a joint venture with Kentucky Fried Chicken) and the pizza chain Sbarro are larger. Teremok anticipates $110 million in revenue this year, up from $63 million last year, and the company may soon expand into the U.S. and Western Europe. Mikhail Goncharov, 37, Teremok's founder, has big plans for the humble pancake. "We think blini could be for Russia what pizza is for the Italians," he says.

Teremok began in the wake of the 1998 financial crisis. The name, suggested by Goncharov's mother, who is the company's head chef, translates roughly as "Fairy-Tale Cottage," and the company's rise has been something of a Cinderella story. When the Russian stock market crashed in August 1998, Goncharov lost the electronics-distribution business he had started. "For the first month, I was really sad," said Goncharov, who was born in Kazakhstan and studied mathematics at Moscow State University. "Then I decided I have to start a new company." Earlier that year he had visited London and Paris, and he recognized in the sidewalk creperies a model for selling Russian blini. "I understood this was one of the great ideas," he says.

At the time, fast-food chains were scarce in Russia. McDonald's, a pioneer in Russia, was a model, particularly for its cleanliness and sanitary procedures. "The quality in the Moscow McDonald's is really high," Goncharov says, adding that Teremok strives to match or exceed it.

With $80,000 in capital ($30,000 of his own and $50,000 from two former business colleagues), he opened his first kiosk in April 1999, on Moscow's Leningradsky Prospekt. By 2001, he had 15 kiosks in Moscow and 12 in St. Petersburg. "From the beginning, I was going to build a really good company, not just two or three restaurants for me," Goncharov says.

He had the good fortune of launching his trendy food outposts just as the Russian economy took off again, creating a generation of free-spenders eager to indulge in the new culture of eating out. "The company understands its consumer base very well," says Anastasia Alieva, an analyst at Euromonitor International. "Pancakes with butter, jam or traditional fillings like cheese, ham or mushrooms are offered at affordable prices. But also there are more expensive variants, like pancakes with caviar or smoked fish."

Russian consumers, according to a recent report from Euromonitor International, want to be entertained, so to keep them interested, Teremok regularly introduces new fillings. (The latest is salmon, herring, cucumber and a special sauce). Teremok gives away toys, based on a popular Russian children's cartoon, with kids' meals and uses secret shoppers to monitor workers' politeness. (Bonuses are distributed on the basis of their reports.) All of it is learning by doing. "When I see a problem," Goncharov says, "we buy books on the topic, then we read, then we decide."

The original concept and menu haven't changed much in 10 years, but the scale of production has increased dramatically. "If you're chopping 100 kg of mushrooms, you do it one way," Goncharov says. "If it's 200 kg of mushrooms, you do it a totally different way." The company has upgraded factories four times, and now has a 4,000-sq-m site.

Goncharov insists that Teremok will leave its national identity behind--but not the increasingly fashionable national snack--as it goes international. "I don't want to be a Russian company in Germany," he says. "In Europe and America, they don't really like the Russians. But they could like the good products from Russia." Especially if they come with caviar.