Foreign food chains brave risks for a bite of Iran

EghtesadOnline: For years, Iranians have had to put up with the likes of "Mash Donalds" and "Pizza Hat". Now real Western food franchises have finally arrived, but doing business in Iran is not for the faint-hearted.

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25 July 2017

Despite strict international sanctions being eased under a nuclear deal with world powers last year, the Iranian economy remains bogged down by red tape and struggles to attract foreign investors.

But a couple of European food franchises have decided the risks are worth taking for a taste of the estimated US$7 billion Iranians spend in restaurants each year, and which local consultancy ILIA says will double in the next decade.

Spain's Telepizza opened its first outlet this month through an Iranian consortium that plans to pump 100 million euros into expanding nationwide.

But one of the first Europeans to really get his hands dirty on the ground is 41-year-old French entrepreneur Amaury de la Serre, who bought the rights to launch Sushi Shop in Iran after falling in love with the country during a visit in 2013.

The first branch of the high-end French chain opened last week in a chic north Tehran neighbourhood, marking the culmination of a bruising 18 months of work.

"There's a strong government will to bring foreign capital and know-how here, but at the day-to-day administrative level, it's hell," de la Serre told AFP.

'NO PAIN, NO GAIN'

"Everything takes time, everything is complicated. It is very, very difficult to deal with customs.

"But no pain, no gain. And things are changing at full-speed here. I love this country and I'm very excited to be a spectator to its evolution."

Getting the supply chains running was certainly complex -- the restaurant uses 150 mostly local suppliers and must ship fresh fish from Norway three times a week.

It took a year just to get the licence to import Japanese sauces, and navigating Tehran's notorious real estate rackets was a saga in itself.

The government says it is trying to streamline its bureaucracy, but Iran actually fell three places in this year's ease of doing business rankings from the World Bank, down to 120 out of 190 countries.

Still, some of the biggest headaches are back in Europe, where banks are so afraid of US penalties that they freeze accounts at the merest whiff of a link to Iran.

"It's crazy. We went to the French Ministry of Economy and they gave us a list of all the banks that would agree to work with Iran. But when we called them, every single one said no," said de la Serre.

Eventually he found a small private bank willing to handle his transactions because they have no links to the US.

'THEN MR TRUMP ARRIVED'

But while he remains bullish on Iran's economic prospects, there are enough storm clouds on the horizon to keep him cautious.

"We wanted to launch several brands at once, but then Mr Trump arrived so we're taking the foot off the pedal a little," said de la Serre.

The US president has worried would-be investors in Iran with his aggressive stance against the country.

Just this week, he announced new sanctions over Iran's ballistic missile programme and what it called Tehran's support for terrorist groups in the Middle East.

Conservatives in Iran still rail against Western "cultural infiltration", even if the time in 1994 when the first post-revolution McDonald's was burned to the ground -- two days after opening -- seems a distant memory.

Today, Iran's affluent middle class has largely rejected ideology and is hungry for foreign brands, while fast-food has spread like wildfire even in remote villages.

And even conservatives recognise the urgent need for jobs with unemployment at 12.5 per cent, and far higher for young people.

"Expansion in the fast-food sector is a job creator precisely where Iran needs it most," wrote Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, in a recent briefing note.

"After all, many of the world's greatest entrepreneurs got their start delivering pizzas."