History of Lviv Croissants: A breakthrough in the Ukrainian market and a comeback in Poland

In just two years, the mono-product chain, Lviv Croissants, has grown by almost a third, despite facing a full-scale war. Between 2022 and 2023, 40 new locations opened, bringing the total to 159 bakeries as of January 2024 – 23 of them owned and 136 operating under franchise. With this achievement, the brand claimed the top spot in Forbes Ukraine's ranking of the largest restaurant chains in the country.

Even more impressively, the founders have made a triumphant return to the Polish market. Despite a failed attempt in 2018 that resulted in losses of $150,000, the network has now firmly established itself in Poland, boasting 11 bakeries. Plans include opening new locations in other European countries, as well as in the United States.

How did they manage to scale at such rates? What did they learn from financial setbacks? And what was the origin story of Lviv Croissants? CEO and founder Andrii Halytskyi shared the details with LIGA.net.

It all started with hot dogs

No, they weren't sold alongside croissants or before them. The entrepreneurial journey of the brand's founder began with hot dogs. In 2001, after completing technical school and dreaming of starting his own business, Andrii Halytskyi opened several hot dog stands in Lviv, funded by loans from family and friends. Two years later, they transformed into the fast-food cafe chain, Burgers Buffet.

"I always wanted to be an entrepreneur, the owner of a large company. It all became more concrete, and I realized I wanted to have a fast-food cafe chain. The stories of McDonald's and Starbucks fascinated me. When I had the money, I started attending business courses in Kyiv. Once, I stumbled upon a franchising course led by Polish entrepreneurs. That's when I understood that this was a fast method of scaling, and I became passionate about the idea," says the entrepreneur.

Andrii Halytskyi applied his first franchising experience in the Burgers Buffet project, selling three franchises for a Lviv establishment. However, this network format couldn't sustain itself for long. The entrepreneur was constantly searching for new and interesting menu items, and eventually, it became too bloated. According to him, the bakery started resembling a buffet. Croissants were there, but among numerous other items, they simply got lost.

"Once, in one cafe, we forgot thawed croissants on the baking counter. It was winter, the cafe was warm, heating was on. After a while, I noticed that they had risen significantly. We baked them like that. That's when I felt it was a superproduct. And I decided to highlight it," says Andrii Halytskyi.

Monoformat features

In a modest space of 15 square meters, the entrepreneur set up a cafe offering only croissants with various fillings and coffee. The results exceeded expectations: people lined up for orders, and positive reviews poured in.

"And I realized, this is it. This is the format that will be easy to scale, so we need to act. I called my brother and friends to make joint investments. We planned to open several cafes with seating right away because the first one didn't have that," says the network's leader.

Thus, in 2015, the first three Lviv Croissants bakeries appeared in Lviv. The same year, the first franchise opened in Sumy, which still operates. Initially, the brand's partner prepared the premises for Burgers Buffet. However, when Halytskyi told him about the new format and its prospects, he agreed to change the brand.

The advantage of single-product eateries, according to the entrepreneur, lies in minimal product write-offs and the ability to streamline processes almost to automation. Moreover, at that time, there were hardly any cafes of this format in Ukraine, excluding shawarma outlets. There are also no high requirements for the interior, emphasizing minimalism.

Overall, the Ukrainian restaurant business is characterized by high creativity and numerous unique concepts, according to the entrepreneur.

"We have high competition, but at the same time, there is a high level of service and food quality. In Europe, you won't find such cleanliness and service in cafes, except in expensive restaurants. But when it comes to the mass market, they don't hire a lot of staff. Yet, their guests aren't as demanding; everyone understands: you get what you pay for. But not with us," says Halytskyi.

Scaling in the domestic market

At the start of full-scale expansion, the Lviv Croissants network had over a hundred bakeries. McDonald's was and is the main competitor.

"The fact that McDonald's was closed increased revenue, but it didn't fundamentally affect us. Just like its reopening didn't have a significant impact. Where our points were nearby, we felt a two-week drop in revenue. But then everything returned to average indicators. Overall, bakeries working near McDonald's feel good because they generate good traffic. McDonald's for us is like an older brother," explains the businessman.

The addition of 40 new bakeries over two war years occurred due to changes in the market situation. The main factor, however, was the availability of new convenient locations.

"Yes, on one hand, due to the war, the number of consumers and their purchasing power decreased. But it also happened that the overall number of businesses decreased. Before and during the war, we had no trouble finding willing parties to open bakeries. When the war started, many excellent locations were freed up, and at an attractive price, which were previously occupied by other businesses. So, during these two years, we secured very cool premises," explains the company's founder.

The founder's plan for Lviv Croissants is to compete with McDonald's in the "drive" format. To serve guests directly in their cars, LC Drive establishments are planned to be opened. Currently, one bakery of this format operates in Cherkasy. Andrii Halytskyi sees the advantage of his network in the convenient locations of the bakeries.

"The guest chooses whoever is on the way. It all depends on scaling, being located in good locations with convenient access," says the entrepreneur.

However, such a format requires a different level of investment and demands for the location itself. Construction of an establishment without spending on land, and obtaining permits will cost approximately $400,000. According to Halytskyi, there have been eager buyers for a franchise like this for a long time. Still, the problem lies in finding a good location.

Rematch in Poland

After an unsuccessful first attempt to enter the Polish market, the founders didn't abandon the idea of returning. Instead, they prepared.

"Now we entered the Polish market with a different approach: a formed team, which we didn't have then, improved standards, adapted menu, pricing policy, and a better understanding of the market. In 2018, we essentially paid for this lesson. It's essential not to compare 2018 and 2022 – it's a different level of brand recognition. Since many Ukrainians now live in Poland, we realized that we are guaranteed the first guests. Moreover, many Poles had been to Lviv during that time and were familiar with our brand," notes the network's CEO.

The cost of opening a branch in Poland is approximately 150,000 euros (about $163,000). Of the 11 locations, 5 are owned, and 6 are franchised. If we add expenses for the office, management, and marketing research, which also amounted to approximately 150,000 euros, the founders invested almost 1 million euros (about $1,088,000) in Polish bakeries. The returns depend on the location.

"Some of them are performing as expected in terms of return on investment. This process is going as planned, and the funds should be returned within 24-26 months. But there are also those – currently two bakeries – that are performing less. These are residential areas where the brand is not as well known. There, the establishments operate with minimal profitability, and the question of return on investment is over four years," says Halytskyi.

Discussing the difference between the Polish and Ukrainian markets, the network's founder names the necessity to build relationships with Poles from scratch, earning trust.

Because of this, some menu items had to be changed, adapting it to the tastes of Polish guests. The management hired an experienced brand chef to work in the Polish office.

"For example, some of our creams didn't appeal to the Poles in sweet croissants. Although Poles like herring, our croissant with it in Poland also didn't gain popularity. Plus, we added several positions exclusively for the Polish consumer. For instance, a croissant with an egg mass. It's when a boiled egg is chopped and mixed with mayonnaise, creating a breakfast sandwich. That's theirs. For holidays, we make a poppy seed croissant, which is not available in Ukraine," says Halytskyi.

New foreign markets

Currently, the founders are in talks about opening new bakeries in other European countries. In Slovakia, the location is already agreed upon, and the process of signing a lease agreement is underway. In several other European countries, they are looking for locations. In Europe, the founders plan to expand through franchising, with management operated from Warsaw.

"Our franchise is currently chosen mostly by compatriots. All six franchised bakeries in Poland were opened by Ukrainians who have lived there for several years. They were interested because they knew the brand, and they wanted to be among the first to kick off the international expansion of this brand. Our product is not just great and competitive; it's unique. Such a product in this format is not available in Europe at all. It's something that definitely won't compete with McDonald's because the market is saturated with it. With money, you might buy one or several franchises, but you won't become the owner of hundreds of McDonald's," says the network's founder.

The strategy for entering the U.S. market is different. In this country, the founders will open food establishments in the dark kitchen format – a virtual restaurant without seating that operates only for delivery.

"We already have a small production there – a bakery workshop, a mini-office, a team, an American partner. And we are preparing for the opening. Next, we plan to open several corporate establishments. And then, when the financial model is confirmed, we can think about selling franchises," says Andrii Halytskyi.

To enter foreign markets, you need to know some rules. First and foremost, says the franchiser, you need to understand if your product is needed there. For this, it's worth investing in marketing research. Then see how your product works in different locations: is it bought uniformly everywhere or only in tourist places? Based on this, build a vision of how to move forward.

"You need people who will represent your interests in another country – co-owners, top managers. They must know the local language. It's best to hire a compatriot who has been living there for several years. You need to have a financial cushion; without it, nothing will work. These are all significant expenses, and be prepared that for a year or two, it will only be investments and money consumption," warns the entrepreneur.

Constant control

Successfully developing such a branched network with many processes is possible thanks to a team, automation, honed processes, and constant control. The latter point in the network is noted for particular meticulousness. Employees send photo reports to managers three times a day. The CEO himself reviews photos of Lviv bakeries and can selectively look at other network establishments.

"In the morning, it's a report on the readiness of the object to open. Employees stand in a row in uniform; all containers in the refrigerator are labeled; there should be order at the workplace, and cleanliness in the toilets. Each deck with croissants is photographed. These control elements have been with us for a long time. But what's essential is not just control. I build a team like a big friendly family where everyone cares about their piece of work," says the franchiser.