Kabul, Dec 18 : The next time you stroll through downtown Kabul, you might be able
to buy batteries from a RadioShack (RSH) outlet, the result of a new effort by
the U.S. to shore up Afghanistan’s economy: selling American franchises to
Afghan entrepreneurs.
The U.S. has set a 2014 deadline for troops to
withdraw from Afghanistan and turn security over to Afghan military and police.
That is prompting capital flight, depressing property values, and triggering
other economic pain. That’s where franchising might fit—and an initial foray
into the country proved promising, U.S. executives say.
“I didn’t have
huge expectations going there that we would consummate an agreement, but after
being there on the streets and seeing some fairly sophisticated [retail]
operators in a very difficult climate, I’ve walked away with the fact that we
would do business in Afghanistan,” says Martin Amschler, a RadioShack vice
president who joined several American franchise executives to participate in a
five-day matchmaking event in Kabul this week.
Organized by the U.S.
Department of Commerce, the U.S. Agency for International Development, and the
International Franchise Association (IFA), the event gave franchising brass a
chance to explore the market and meet with Afghan businessmen and U.S. and
Afghan officials. Outside of mostly fast-food chains on bases, there aren’t any
American franchises in Afghanistan, says Beth Solomon, a vice president at the
IFA who led the trip. “There is a vast culture of young [Afghans] who are very
tech savvy, Internet savvy. Everyone’s got the latest Samsung or iPhone,” she
says, “and there is disposable income.”
The big idea behind the effort is
the “knowledge transfer” of infrastructure-building and business services
expertise to locals to help rebuild the country, says Solomon, who recruited
participants from RadioShack, Hertz Equipment Rental (HTZ), Tutor Doctor, and
AlphaGraphics. “Franchising can be a very useful transitional economic
development strategy, because the challenges of security and so forth can be
minimized because it’s Afghan business leaders who are going to run these
businesses,” says Solomon.
Of course, with more than one-third of
Afghanistan’s 30 million people living below the poverty line, according to the
CIA’s World Fact Book, much of the population can’t afford to buy an American
franchise.
Bill Edwards, a seasoned franchising consultant who
specializes in exporting American franchise brands such as Build-A-Bear Workshop
(BBW) and Denny’s (DENN), and was on the trip for AlphaGraphics, doesn’t see a
lack of Afghan investors. “There’s a lot of money there” willing to invest in
American franchises, Edwards says. “There’s a need for Western business. There’s
a market, there’s consumers, there’s funding, there’s capital. But there’s all
the other challenges, of course.”
Apart from security, the biggest
challenge would be vetting prospective buyers, says RadioShack’s Amschler. “But
at the end of the day there are private contractors over there today that
provide those services and then, of course, we would have our own list of
requirements in terms of net worth and what types of business experience they
have,” he says.
Approved Afghan buyers would attend RadioShack University
at corporate headquarters in Fort Worth and get “support on the ground” from
RadioShack employees for about two weeks when a store opens, plus training
visits throughout the year, Amschler says.
Among other efforts to
stabilize Afghanistan’s economy, how significant could franchising be? A
statement from the Commerce Department’s International Trade Administration
about the conference notes “franchising has proven to be an ideal market vehicle
for both employment and economic growth.” Edwards says he thinks franchising is
“the model” because “it brings a business model that’s proven. It brings
training, which is the thing they need; the skill set is just really not good
there.”
Education is crucial to Afghanistan, says Rogelio Martinez, vice
president of international franchise development at 30-employee Tutor Doctor, a
“supplementary education” business that has sold about 400 franchises in 14
countries. “It’s something that everybody was talking about. [Afghan] business
owners wanted to develop Afghan employees to take mid-level, senior-level
management positions. Families want their kids to learn and attend good
universities in Afghanistan or abroad.”
The Van Nuys (Calif.) company,
which Martinez says charges franchisees about $57,000 to get started, provides
training and an online tool that uses a Skype-like interface for tutors and
students to communicate online. He expects to sell about seven franchises in
Afghanistan in 2013. “They can’t be importing expats all the time; they need to
have the local talent to have a sustainable model,” says Martinez.
David
Riker, franchise development director for Hertz, is also optimistic about his
company’s prospects in Afghanistan. Unlike fellow participants on the Kabul
trip, he already has franchises on two military bases there, renting heavy
machinery used in building roads and construction projects. “As the military
draws down, Afghanistan is going to have to support more of its infrastructure,
so that’s where the opportunity comes in,” Riker says. Depending on what kind of
equipment a franchise buyer wants, getting started is “probably in the $3
million range.”
Aiding Afghanistan through franchising certainly won’t be
quick, says Edwards. “Let’s not be too Pollyannaish. This is going to be a
challenge, but it’s definitely an
opportunity.”
Ends
SA/EN
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» Extreme franchising: Bringing RadioShack to Afghanistan
Extreme franchising: Bringing RadioShack to Afghanistan
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