X5 Retail Group, Russia's largest food retailer by sales, has agreed to form a joint venture to run convenience store franchises in and around the cities of Moscow and St. Petersburg.

X5, formed last year after the merger of the Pyaterochka and Perekrestok chains, will hold a 40% stake in the venture and has options to buy more shares in the years ahead.

The stores will be between 50sq m and 200sq m in size, X5 said. The company has 709 company-managed stores in Russia and the Ukraine and some 601 franchised stores in Russia and Kazakhstan.

The retailer will set up the venture with a private consortium that includes Valery Tarakanov, the owner of the Perekrestok-Mini franchises and German Goglichidze, the chairman of Russian casino chain Jack Pot. Tarakanov is being lined up to run the venture, X5 said.

X5 chief executive Lev Khasis said: "The new franchising programme announced today not only strengthens our leading position in the two most important regions of the Russian market but it also ensures convenience for our customers, as part of our strategy focused on long-term multi-format organic growth."

Khasis said X5 would study how the venture performs in Moscow and St. Petersburg before deciding whether to roll it out across the country.