x Abu Dhabi, UAESaturday 20 January 2018

Doors open on entrepreneurs in Afghanistan

The Life: As part of a new effort, the US officials are shoring up Afghanistan's economy by selling American franchises to Afghan entrepreneurs.

Franchising is seen as economically beneficial for Afghanistan and RadioShack is one US company considering a partnership. Steven Brahms / Bloomberg News
Franchising is seen as economically beneficial for Afghanistan and RadioShack is one US company considering a partnership. Steven Brahms / Bloomberg News

The next time you stroll through downtown Kabul, you might be able to buy batteries from a RadioShack outlet, the result of a new effort by the United States to shore up Afghanistan's economy: selling American franchises to Afghan entrepreneurs.

The US 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, say US executives.

"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 recently joined several American franchise executives to participate in a five-day matchmaking event in Kabul.

Beyond mostly fast-food chains on bases, there are no American franchises in Afghanistan, says Beth Solomon, a vice president at the International Franchise Association 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 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 Ms Solomon, who recruited participants from RadioShack, Hertz Equipment Rental, Tutor Doctor and AlphaGraphics.

"Franchising can be a very useful transitional economic development strategy because the challenges of security and so forth can be minimised because it's Afghan business leaders who are going to run these businesses." With more than one third of Afghanistan's 30 million people living below the poverty line, according to the CIA World Factbook, much of the population cannot afford to buy an American franchise.

Bill Edwards, a seasoned franchising consultant who specialises in exporting American franchise brands such as Build-A-Bear Workshop and Denny's, 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, Mr 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, Mr Amschler says. "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."

Approved Afghan buyers would attend RadioShack University at its corporate headquarters in Fort Worth, Texas, and get "support on the ground" from RadioShack employees for about two weeks when a store opens, plus training visits throughout the year, Mr Amschler says.

Among other efforts to stabilise Afghanistan's economy, how significant could franchising be?

Mr Edwards 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."

David Riker, a franchise development director for Hertz, is 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 road-building 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," Mr Riker says. Depending on what kind of equipment a franchise buyer wants, getting started is "probably in the US$3 million (Dh11m) range".

Aiding Afghanistan through franchising won't be quick, Mr Edwards says. "Let's not be too Polly-annaish. This is going to be a challenge, but it's definitely an opportunity."

* Bloomberg News