Burgers, Brand Loyalty, and the Brink: Why Russia's Fast-Food Copycats Face a Tasty but Risky Future

The abrupt exit of Western fast-food giants like McDonald's and Starbucks from Russia in 2022 created a vacuum swiftly filled by local imitators such as Vkusno i Tocka and Teremok. These brands, leveraging familiar menus and rebranded infrastructure, now command a significant share of the market. Yet their long-term viability hinges on navigating a treacherous landscape of intellectual property (IP) risks, legal ambiguities, and eroding consumer loyalty. For investors, the calculus is clear: while copycat models may thrive in the short term, their reliance on borrowed branding leaves them exposed to geopolitical shifts, IP litigation, and the fickle nature of consumer trust.

The Rise of Fast-Food Imitators: A Post-Sanction Opportunity

When Western brands fled Russia after the invasion of Ukraine, local entrepreneurs seized the moment. Vkusno i Tocka, rebranded from McDonald's, now operates 930 outlets and generated $2.4 billion in revenue in 2024 by maintaining the Big Mac-like “Big Hit” and other menu staples. Similarly, Teremok capitalized on the absence of Starbucks to expand its coffee and dessert offerings, while smaller chains like Burger & Beer blended Russian flavors with fast-food efficiency. These brands succeeded by piggybacking on existing customer habits, localized supply chains, and government subsidies aimed at reducing reliance on foreign firms.

The Kremlin has further insulated these players through legislation. A proposed law would allow authorities to void buyback agreements if Western brands attempt to reclaim their operations, effectively nationalizing their assets. Additionally, a 2024 bill enables compulsory licensing of foreign patents linked to “unfriendly” nations, effectively legalizing IP theft. These measures create a shield for local copycats but also highlight the systemic risks of operating in a regime that prioritizes domestic control over international norms.

The IP Trap: Legal Ambiguities and Global Backlash

While local brands benefit from Russia's protectionist policies, their long-term survival is jeopardized by geopolitical uncertainty and weakening IP frameworks. Western companies like McDonald's retained trademark rights and could sue to block copycats in neighboring markets (e.g., Kazakhstan). A 2023 trademark dispute over the name “Vkusno i Tocka” itself—accused of plagiarizing the Primorski Krai-based “Food, full stop”—illustrates the fragility of these brands' legal claims.

More broadly, as global IP enforcement weakens, copycat firms face a dual threat:
1. Reputational damage: Russian consumers may grow weary of ersatz brands as memories of Western quality fade.
2. Western retaliation: If sanctions ease, Western firms could flood back, leveraging their IP rights to disrupt local competitors.

Consider the Coca-Cola vs. FANT case: In 2022, a Russian court blocked a carbonated drink mimicking Fanta, underscoring that even in Russia, some IP protections endure. For investors, this signals that copycat models are not airtight against litigation—especially if geopolitical tensions ease and international cooperation resumes.

Brand Loyalty Erosion: A Double-Edged Sword

Copycat brands thrive on familiarity, but this reliance on borrowed equity is a strategic liability. Over time, consumers may reject imitations as inferior substitutes, especially if economic stability returns and premium alternatives re-enter the market. Take Teremok: while its coffee shops have grown rapidly, their success depends on differentiation from Starbucks—a brand many Russians still associate with quality. If Western brands return, Teremok's lack of unique IP could become a vulnerability.

Meanwhile, genuine innovators like Burger & Beer—which focuses on fresh ingredients and local flavors—offer a better investment thesis. Their distinct menus and localized supply chains reduce IP risks while building sustainable brand equity.

Investment Advice: Avoid Copycats, Back Innovators

For investors, the message is unequivocal:

1. Steer clear of firms reliant on copied trademarks: Brands like Vkusno i Tocka face existential risks from IP disputes, geopolitical shifts, and consumer backlash. Their valuation is tied to a legal house of cards that could collapse under renewed sanctions or Western legal pressure.
2. Favor companies with authentic innovation: Look for Russian firms that build distinct IP (e.g., unique recipes, patented technologies) and strong domestic supply chains. Teremok's dessert specialization and Burger & Beer's farm-to-table model exemplify this.
3. Monitor geopolitical and legal trends: Track Russia's IP laws and Western sanctions. If the Kremlin softens its protectionism or sanctions are lifted, copycat brands may face a reckoning.

Conclusion: The Tipping Point

Russia's fast-food sector is a microcosm of its broader economic challenges: short-term gains through imitation versus long-term sustainability through innovation. Copycat brands have filled a void left by Western exits, but their future is as unstable as the geopolitical climate. Investors seeking resilience should focus on homegrown innovators and self-sustaining supply chains, avoiding the siren song of quick wins built on borrowed trademarks. In a world where IP frameworks are fracturing, the only safe bet is to back businesses that don't need to steal to survive.