Domestic Economy

Franchising Can Help 

When we consider the prospects and potential of franchising in diverse industries, we see tangible opportunity for sustainable cooperation between real-estate owners and brands, says marketing strategist Peyman Farshchi
Franchising Can Help 
Franchising Can Help 

Over the years, the high and rising cost of commercial real estate has emerged as a major impediment to setting up a business in urban areas and sprawling metropolises not only in Iran but also in most other countries. Needless to say, for brands to set up shop under the circumstances is a herculean task. 
Add to this the fact that under dire economic conditions, many owners of office buildings and commercial spaces refuse to sell or lease their property. When you juxtapose this reality and consider the prospect and potential of franchising in different industries, you’ll see opportunity for cooperation between real-estate owners and top brands. 
Peyman Farshchi, a marketing strategist, prefaced his recent write-up for the Persian monthly journal Zaraban-e-Eqtesad with this note. What follows is a translation of his article: 
Today the price and rent of commercial real estate are unaffordable, to say the least. Buying property, especially in the upscale commercial districts, is not economically viable more so when you contemplate the deposit rates banks pay for big money. 
This valid realization gained currency in big cities in the United States and Europe and later in Asia, such as Iran, thanks to the high population density in urban areas. 
There also are other constraints in Iran, one of which is the lack of commercial guidelines and binding regulations regarding the type of contracts between two institutions or individuals. As such, franchising, though fledgling, is not well-established in Iran and the law fails to specify how the parties involved would be able to defend their interest if and when disagreement arises. 



Rule of Law 

For property owners to keep their commercial estate operational and generate income streams, entrepreneurship and job creation should expand in the country. Therefore, the transparency of the rule of law guiding franchises should improve and be streamlined to augment Iran’s retail economy. 
For example, a chain store that has some 100 branches will be able to create 5,000 jobs, if it could increase the number of branches to 1,000 and employ five people in each branch. 
In addition, when retailing improves and grows, more people will participate in the purchasing process, investment in the production sectors will grow and by extension the economy will develop. 
In sum, it means that franchising has a direct interrelationship with job creation and economic prosperity.  
One may ask, given the scale and scope of the franchising industry, why has it not gained a secure foothold in Iran. The truth is that this type of business is relatively unknown and people are reluctant to make their property available to big enterprises without proper safeguards and guarantees about the operational return they desire. 
Therefore, if those in charge are able to detail legal procedures that allow real-estate owners to restore their rights during disputes, people will have the necessary confidence to accept franchising.



Business Acumen

In many urban areas of Iran, there is an abundance of vacant commercial real estate because their owners lack business acumen and capital or competent managers to run the show. 
Circuiting the main bazaars, shopping malls and high-end commercial centers in many major Iranian cities, one usually comes across retail outlets shuttered for years. 
When asked about the closures, those still in business talk of a variety of agonizing reasons, namely that the rents are too high, wealthy and uncaring owners of the properties have gone overseas and business is slack. There is also the apparently irritant tax regime and galloping inflation eating away at the purchasing power of large sections of the society. 
We need to bear in mind that franchising is a win-win concept. Business owners can expand through retailing; stores located in busy commercial areas are indeed suitable for franchisers. 
Besides the most important parameter – dearth of law – clearly outlining the mechanism of profitmaking in franchising is crucial. It should be known in unambiguous terms how the parties involved in a franchise will be able to administer the business. 
Drawing on the wealth of global experience can and will inject transparency and efficiency into the approach, which will be employed to share profits and ensure the satisfaction of both parties. This must top the agenda of the much-needed franchising industry in Iran. 

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