Spotlight on Mexico

Mexico, with its rustic charm and dramatic arts, appears to be nurturing its franchise industry to ensure steady growth; Ferenz Feher Tocatli, CEO of Feher & Feher, reveals why UK franchisors should consider investing in Latin America

Franchising in Mexico began more than two decades ago, and its primary focus was to give Mexican consumers access to a few and select US-based products and services that otherwise would have been unavailable to them (ie, McDonalds).

Mexican franchising has come a long way since then, it is estimated that the economic impact franchising has in Mexico is of 80 billion pesos (approximately $6 billion USD). Without doubt, the franchise model is now a well-known and accepted business format that appeals to many industries and investors in the country.

Today, more than 70 per cent of the franchised concepts in Mexico are of Mexican origin and the international-based franchised systems in Mexico come from many countries including US, Brazil, Spain and Peru. For every peso spent in Mexico, it is estimated that 15 cents are spent in a franchised business. In other words, 15 per cent of all expenditures in Mexico are linked to franchising.

Rapid growth
Mexico is quickly developing a robust franchise culture, and franchise systems are developing at a rapid pace and in impressive numbers. Franchising has been successfully used as a stable business growth mechanism and a great source of capital, and it is easy to see why; while 65 per cent of independent business start-ups fail by the second year of operations, 95 per cent of franchised businesses remain economically viable after five years of operation.

Mexico is not only a hub for international franchise systems, but is also a great developer and exporter of successful concepts. The International Franchise Expo held annually (March) in Mexico City is a testament to this; growing steadily in influence and size over the past five years, reaching a total of 35,000 visitors in 2008. Foreign franchisors participate in the Expo through specialised International Pavilions. The ‘Feria Internacional de Franquicias ‘as it is known, has recently showcased pavilions from Brazil, Spain, US and Portugal.

Regulation
Because of its relative youth, franchising in Mexico is not as highly regulated as it is in some other countries; however, laws are in place to ensure the proper establishment of franchise systems and to provide security and continuity to both franchisees and franchisors alike. The Mexican Congress is continually looking to improve on the existing legal framework surrounding franchising in Mexico, a testament to the importance of this business model in the country. Franchising is regulated by the Mexican Industrial Property Law.

As a developing nation, Mexico is open to fresh ideas and welcomes businesses, which will create new jobs. Mexico’s franchise association, Associación Mexicana de Franquicias (AMF), is hard at work travelling around the world promoting Mexican franchises in other countries, as well as inviting franchise concepts to take their products and services to Mexico. The AMF is also very much interested in expanding and improving franchise knowledge in Mexico. As of today more than twenty franchise concepts have opened businesses around the world: Sushi in Spain, eye-care and optical outlets in Guatemala, and taco restaurants in China.

Thirsty for more
There is a vast and ripe market to explore in Mexico, especially outside of Mexico City. Mexico tends to be a centralised nation, so the rest of the country is wide open and thirsty to experience the same products and services the capital has to offer.

It is a developing, young nation with endless possibilities. There are more than 750 franchise systems in more than 72 different industries, which according to the World Franchise Council (WFC) it ranks it as one of the top ten countries in franchise operations, alongside other countries such as China, United States, Japan and Brazil. There are more than 60,000 points of sales around the country, making it almost impossible not to see a franchised unit anywhere you go.

With all this growth and exposure, the Mexican Government is now more than ever, interested in franchising. A clear indicator of this interest is the National Franchise Programme (among others), which promotes the growth of new businesses through a franchised model with new loans and incentives.

Franchise development in Mexico is growing in a number of industries. Most importantly new and innovative trends are gaining terrain, such as concepts that fulfil the needs of working mothers by providing support with personal, home and child-care services as well as those that provide early child development, education, babysitting services, and cleaning and repairs services.

Another sector in huge demand is concerned with businesses that are dedicated to supporting and providing services to mature adults, such as entertainment, personal care, assisted living and medical services. A surprising number of franchises are now dedicated to offering cleaning services, as well as laundries, dry cleaners, and tailor shops.

It is clear that Mexico is on the path of progress and part of this will only come with the right participation of all the people involved. Franchising in Mexico is at an important peak; the regulatory, cultural and political climate for several countries interested in operating in this country is at an optimum.

For further information on franchising in Mexico visit:
Feher & Feher –
www.feherandfeher.com
The World Franchise Association –
www.worldfranchiseassociates.com
The Mexican Franchise Association – www.franquiciasdemexico.org