Guide on Setting Up a Business in Georgia: Insights from a Personal Venture
In an exciting move, Russian entrepreneur Alexei Romanov, founder of Bright fit fitness centers, is set to expand his business to Georgia and Turkey next year. The entry into the Turkish market is planned for next year, aiming to find a balance between acting quickly and making informed decisions. Simultaneously, Romanov plans to open two more clubs in Tbilisi, Georgia next year, with the necessary contracts already signed.
Romanov believes that the fitness industry in Georgia is following a similar path to Russia, with development happening a bit earlier due to various reasons. He attributes this to the reforms initiated by former President Mikhail Saakashvili, which have simplified the registration of deals in Georgia, making it possible to complete the process within one day.
Georgia offers a dynamically growing, reform-oriented economy with integration in ICT and services. However, Russian businesses, including fitness centres, face political, regulatory, and market adaptation challenges compounded by ongoing geopolitical tensions and economic differences between the two countries.
Despite these challenges, the business environment in Georgia is distinct, with lower corruption than Russia but still informal economic elements and vulnerabilities to Russian hybrid tactics. The cost of quality services in Georgia is on par with Russia, not lower.
Meanwhile, in Turkey, the GDP per capita is much higher than any other CIS country except Russia, making it a more obvious choice for expansion compared to other CIS countries. The fitness industry in Turkey is not as developed as in Georgia, presenting opportunities for expansion and studying the local mindset, influenced by both European and Islamic traditions.
The "Prime fit" fitness club, opened by Romanov in Tbilisi in 2022, is a full-fledged operator, having rented a space, reconstructed it, and launched the club. The clubs will be located in the prestigious areas of Vake and Saburtalo, which have a high concentration of relocated Russian-speaking population.
Interestingly, approximately every fifth or sixth visitor to the "Prime fit" fitness club is from relocated Russians. The "Prime fit" fitness club has a total area of 2600 sq.m and features adult and children’s pools, a spa, and a separate brand.
In Georgia, businesses pay the full 18% VAT, unlike in Russia where fitness businesses have a zero VAT rate. However, the Georgian tax burden is comparable, with social and insurance contributions of 22-24% per employee. The cost of construction and materials in Georgia is lower compared to Russia, with a potential difference of up to 30% for certain aspects and positions.
Alexei Romanov chose to expand his business to Georgia due to the small market size, lack of fierce competition in fitness, and the opportunity to gain international experience. With the population of Istanbul and Izmir in Turkey being around 20 million and 3 million respectively, the potential market in Turkey is significant.
Banks in Georgia operate similarly to those in Russia, with the banking system being less developed for individuals but similar for organizations. Romanov's decision to expand to Georgia and Turkey underscores the growing opportunities in these markets for Russian businesses, despite the challenges they may face.
Alexei Romanov, an entrepreneur in the fitness industry, acknowledges the parallels between the growth of the fitness market in Georgia and Russia, citing the ease of business dealings in Georgia due to reforms initiated by former President Mikhail Saakashvili. Meanwhile, Romanov plans to venture into the relatively unexploited Turkish market, recognizing the potential of the fitness industry there while balancing speedy growth with informed decisions. He envisions his business expansion in both countries as an opportunity to gather international experience and adapt to diverse market conditions.
