Afghans will be able to shop from RadioShack stores by 2013

in Afghan Business

Afghans will be able to shop from RadioShack stores by 2013

By Dawood Essa

The next time you take a walk through downtown Kabul, you might be able to shop from a RadioShack store like this one. You will be able to buy batteries and other accessories 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 many other economic issues. That’s where this franchising plan might fit—and an initial venture 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, 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 companies a chance to explore the market and meet with Afghan businessmen and U.S. and Afghan officials. Outside of mostly fast- food chains on military 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 to transfer knowledge 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.

Currently, RadioShack is one of the few companies that have decided to invest in the Afghan infrastructure, given the looming withdrawal of U.S forces in 2014.

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), 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 assessing 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. This is going to be a challenge, but it’s definitely an opportunity for the country to grow.



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