That Golden Touch to the Arches in Russia

When the first McDonald's opened in Moscow in 1990, it was the first direct, personal experience for tens of thousands of Soviets with the Western way of customer service.

"It was the most enjoyable day of my life," recalls a young television editor, Olga Golovina, of her first visit. Now she eats lunch nearly every day at a McDonald's near her daughter's school.

In those days, the company was an island of efficiency and quality control in a dysfunctional, state-controlled universe. It supplied itself with everything from beef to milk from its own McComplex near Moscow, and 40 percent of McDonald's employees here were from the West.

The novelty of the Golden Arches on Pushkin Square has long worn off.

And although Americans don't usually think of this fast-food chain as one of their highest contributions to world civilization, the impact in Russia of McDonald's has continued to spread and deepen.

Now McDonald's has 10 restaurants in Moscow and two new ones in St. Petersburg. Of its 3,500 employees in Russia, only four remain non-Russians.

Every day, more than 100,000 people eat at a McDonald's in Moscow; company officials claim the original one is the busiest restaurant in the world. (The new McDonald's in Beijing is physically larger, but serves fewer people per day.)

The company is no longer a self-contained system selling burgers and fries to Russians. More than 100 companies in the former Soviet Union now supply the growing empire of McDonald's in Russia. "Step by step, they grow with us," says Pavel Ryabov, marketing director for McDonald's in Russia.

And the McDonald's example has not been lost on the locals. A Russian fast-food chain, Russkoye Bistro, was launched by Moscow Mayor Yuri Luzhkov in 1995 following directly in McDonald's footsteps. Instead of burgers and Coca-Cola, Russkoye Bistro sells meat pastries and kvas, a yeasty traditional soft drink. Service is quick, prices are well below McDonald's, and more than 100 Russkoye Bistro outlets serve 35,000 to 40,000 people a day.

"If McDonald's had not come to our country, then we probably wouldn't be here," says Vladimir Pivovarov, deputy director of Russkoye Bistro. McDonald's "caused alarm among local authorities to create something of our own."

Olga Golovina, sitting with a friend in a McDonald's dining room, takes national pride that Russians answered McDonald's in a Russian style. "I'm always thinking that we're good fellows because we showed that we're not worse than McDonald's," she says.

"McDonald's helped give form to the new economy," says Mr. Pivovarov. Since McDonald's arrived, he says, he has seen Russians "become better at choosing. They want Western standards of quality and taste."

If McDonald's has been a model of capitalism, it has also become a source of growing business for its developing network of suppliers.

Here in a rough-edged suburb outside Moscow, Belaya Dacha is an expansive farm with 148 acres of greenhouses and 2,000 pigs. It became a Soviet state farm in 1946 and for a couple of decades was the sort of model enterprise toured by foreign delegations. Then other farms took over as the models, got the latest foreign technology, and Belaya Dacha was stuck with noncompetitive Soviet equipment. Now it is fully revived as a closed joint-stock company that delivers lettuce washed and cut, ready to slap on a Big Mac two hours after it is picked.

McDonald's is Belaya Dacha's biggest customer. The agribusiness tripled its sales to McDonald's last year and expects to at least double sales this year, says General Manager Viktor Semyonov. McDonald's is considering putting ready-made salads on the menu, and if Belaya Dacha wins a contract for that business too, its sales could triple or quadruple this year.

Belaya Dacha has grown savvier rather than larger with its expanding McDonald's business. It has no more greenhouses than during its Soviet days as a state farm. But productivity has doubled since 1989, says Mr. Semyonov, largely due to more sophisticated equipment such as Israeli drip irrigation. And Belaya Dacha is just one of the many former collectives, state farms, and new start-up enterprises with McDonald's as a major customer.

This means that all these firms must be able to produce at the level of reliability and quality that McDonald's requires - quite high for a country where truckers still sometimes warm their engines on a cold winter morning by building a fire underneath.

By the end of this year, McDonald's plans to open 10 more restaurants in Moscow for a total of 20. The company also plans two more restaurants in Nizhny Novgorod, including a drive-through, and 10 more by 2000.

McDonald's receives new requests daily from mayors and governors and other officials from across Russia to open an outlet in their locale, says Mr. Ryabov.

Indeed, the world outside US borders is now the best growth market for the iconic American chain. Up against vigorous competition at home from other fast-food chains, McDonald's Corp. now draws 55 percent of revenues from abroad.

This is all good news for Russia in still another way. A New York Times columnist coined a concept a few months ago that has since received some semi-serious scrutiny: the Golden Arches theory of conflict prevention.

The theory holds that no two countries with a McDonald's restaurant within their borders (now more than 100 countries) have ever gone to war against each other. The idea is that McDonald's decides to enter only markets that have achieved a certain level of economic development.

It identified something correctly in Russia: The restaurants are packed.