TEHRAN (Reuters) -- Benetton Group SPA, the Italian fashion retailer known for its vibrant colors and provocative advertisements, said on Monday it planned a chain of shops across Iran.

Benetton opened its first shop two years ago in Tehran, and opened a second in the capital last month.

"Within one or two years, we will be all over Iran," branch chief officer Caio Augusto Milani told Reuters, adding that the next store would open in Mashhad in northeast Iran in October.

"We strongly believe in Iran. We think Iran has a huge potential," he said in his Tehran office.

Milani admitted that the capital for Benetton's plans was coming from Iranians. "It is not a direct investment. All of our investors are Iranian who believe in our brand," he said.

Milani said a population of 70 million people in Iran, the world's fourth largest oil exporter, made an attractive market.

Some other fashion brand names are sold in Iran but generally through independent traders or isolated shops.

"Our collections in Iran are the same as the European collection. Whatever you can find in our stores in Tehran, you can find it in London, Paris and around the world," he said.

Advertisements promoting everything from motor oil to watches and perfumes have mushroomed on billboards in Iran.

"I think we can find inside our collection the kind of advertisement that could suit the Iranian values," Milani said.

He said Luciano Benetton, managing director of the family business, would visit Iran by the end of October to open a shop in Mashhad, home to Iran's holiest shrine.

Benetton is also looking at opening in Isfahan and Shiraz, cities south of the capital, and on the island of Kish, a Persian Gulf holiday resort.

Milani said Benetton was also considering producing its goods in Iran. "We had some talks with officials. Let's see what will be the development of the brand in Iran," he said.

The Benetton Group has 5,000 stores in 120 countries.