Trade Mission participants gather at the US Embassy in Mexico City
While the leaves were changing colors in the US, another Franchise Trade Mission headed south to Mexico. US franchisor brands, which included Boston’s Restaurant and Sports Bar, BrightStar Care, Denny’s, FASTSIGNS, FOCUS Brands, Mosquito Squad, Smoothie King, Title Boxing Club, Wing Zone, World of Beer, and Xtreme Lashes, were among the participants exploring the key Latin American market. According to the Mexican Franchise Association, the country is home to 1370 franchise brands. 90 of those are from the US and over 50 are other international brands. Franchising represents 6% of Mexico’s GDP, making Mexico the 5th largest franchise market in the world.
The trade mission began its journey in the nation’s capital, Mexico City on the morning of October 6th with a market briefing at the US Embassy. The group was welcomed by Rebecca Torres, Commercial Attaché for the Embassy. She told participants, “Culturally Mexico is extremely accepting of US Brands. It’s almost a status thing.”
IFA member Ferenz Feher, CEO of Feher & Feher gave mission participants a briefing on the Mexican market. He mentioned that trade has tripled since the 1994 signing of NAFTA and while annual GDP growth in Mexico was only 1.6% over the last year, franchising grew almost 12% in the last year. Feher offered market tips to the participants, including adapting to the pace of Mexican business culture. Master franchising is the most common model for US franchisors doing business in Mexico, but a regional approach should also be considered. Deals can take as long as 1 to 1.5 years, but then yield a strong return. He stated, “You have a great opportunity on your hands.”
Next, Pablo Hooper Ramirez, Partner with Gonzalez Calvillo briefed mission participants on the Mexican legal and regulatory environment. Mexico is a first to file market, meaning rights belong to the first company to register a trademark, not the first to use the mark. He told the participants that less disclosure is legally required in Mexico than the US. There is a treaty between Mexico and the US to prevent double taxation. Ramirez recommended that US franchisors have their franchise agreements signed in English if their licensee can understand English.
Participants then braved Mexico City traffic to tour a series of Mexico City malls and commercial areas before meeting with prospective partners. The first major shopping mall in Mexico City was built in 1971, but there has been a boom in mall construction in response to the growing demand since 2008. The demand is so high for prime retail space that some malls charge “key money” of as much as $1 million USD for entry.
After spending the day of Tuesday the 7th in matchmaking meetings with Mexican investors, on the night of the 7th, Feher & Feher hosted a reception for the trade mission attended by Mexican businesspeople and government officials, concluding the first stop on the mission’s itinerary.
Ferenz Feher, CEO of Feher & Feher gives a briefing on the Mexican franchise market