Resolution No. 4 — Expanding My Professional Network

There’s a networking extravaganza coming your way to help with that.  There’s no shortage of leadership in the franchise industry and IFA’s newly elected board members demonstrate this fact.  One great advantage of this leadership expertise is that in one place over several days you can meet franchise professionals from numerous brands within the industry during IFA’s Annual Conference, scheduled Feb. 15-18 in Las Vegas.

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It’s understood that your time is valuable and it’s difficult imagining several days away from your office or local business whether you’re a franchisee, franchisor or supplier, but there is a bonus.  In addition to ample educational sessions, you’re at the heart of where many of franchising’s stars will be gathered.   There will be noteworthy keynote speakers and other experts, but you’ll also have the opportunity to catch a quick breakfast with a CEO you’ve always wanted to meet.  Or how about sharing development, marketing or best practices advice with a colleague that you’ve been meaning to call and learn that she’s overseeing a panel during the convention?

Making connections, renewing relationships and thinking outside the box in a relaxing atmosphere will enable you to return to your business with fresh ways of attacking old challenges with new solutions.  It will also build your list of mentors, advisors and friends.

There’s still time to register to connect, innovate and evolve.

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FAN in the States

On Tuesday, October 14, IFA staff Erica Farage and Chris Krueger, and a local Philly Pretzel Factory franchisee, Herv Breault took the Franchise Action Network (FAN) to the State Capitol in Harrisburg, Pennsylvania. The event, which comes after recent industry events in Philadelphia, was a continuance of IFA’s engagement in the state.  As a veteran, Herv has achieved his pathway to small business ownership through franchising.

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The group had a productive day of Member and senior staff level meetings with the Pennsylvania Delegation. IFA met with the following offices: Senator David Argall, Senator Shirley Kitchen, Representative Cherelle Parker, Senator Tim Solobay, and Senator Mike Stack. Concluding the day, IFA met with the Policy Director of Tom Wolf, candidate for Governor. Mr. Wolf is currently leading in the polls and projected to be the next Governor of Pennsylvania.

The takeaways were clear – the FAN needs to be heard in every state capitol and lawmakers want to hear from you, the franchise small business owners. Educating lawmakers at the state level is an important part of the FAN and its days like this that allow the lawmakers to learn how important the franchising industry is to their state and communities.  Through the FAN, franchise small business owners can promote, educate and protect the franchise business model and help tell the franchising story to these decision makers. Locally owned franchises are America’s hidden small businesses, IFA asks your support to get involved, please visit www.FranchiseActionNetowrk.com to sign up.

Specifically in Pennsylvania, the IFA will be working with the state delegation offices and our local members to organize a “FAN, Franchising in your State” day in Harrisburg. These events help educate policy makers on what franchising is and the important role franchising plays to the state economy.

If you would like to get involved with legislative meetings in your state, please contact Erica Farage at efarage@franchise.org or Chris Krueger at ckrueger@franchise.org.

Federal Regulation Costs Challenge Small Businesses

Most franchisors and franchisees are well acquainted with the reality of how their businesses can be negatively affected by government regulation.  IFA, which represents these major contributors to the U.S. economy, applauded Calif. Gov. Jerry Brown for vetoing SB 610 that would have devastated the franchise community in California because “Franchising remains the most viable way to own and operate a small business for many Americans, and provides small-business owners with a chance to build equity for themselves and their families.” Although this bill would have only affected one state and those doing business there if it became law, it would have set a new, dangerous precedent.  Imagine the impact of such wrong-headed legislation at the federal level.

Now there is some solid evidence about the impact of a regulation-heavy federal government. A new National Association of Manufacturers report, “The Cost of Federal Regulations to the U.S. Economy, Manufacturing and Small Business” finds that:

  • In 2012, federal regulations cost $2.028 trillion (in 2014 dollars).
  • An average payroll of 21 percent or $233,182 represents the cost burden for an average U.S. business each year.
  • 88 percent of respondents consider federal regulations a leading challenge for them.

According to NAM President and CEO Jay Timmons in the report’s executive summary: “The analysis finds that the average U.S. company pays $9,991 per employee per year to comply with federal regulations. The average manufacturer in the United States pays nearly double that amount — $19,564 per employee per year. Small manufacturers, or those with fewer than 50 employees, incur regulatory costs of $34,671 per employee per year. This is more than three times the cost borne by the average U.S. company.” Learn more about the report.

Join IFA’s Franchise Action Network to defend the franchise model against harmful regulations and legislation. The FAN is a grassroots network that brings together the franchise industry to speak with one consistent, strong and collective voice on the issues facing our industry. On the website, you are able to keep up on current news and issues surrounding the industry, take action at the state and federal level and gain information on franchising and its economic impact across the Nation. By joining the FAN, you will become a critical part in educating and informing lawmakers at every level about the benefits of franchising.

Monterrey, Mexico: Receptive to US Brands

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Monterrey, Mexico has been described as the most Americanized city outside the US.  The entrance to a major mall with signage in English.

It was an early morning for mission participants on October 8th as the 2014 Mexico Franchise Trade Mission headed north to Monterrey, which is even more familiar with US concepts than Mexico City. While briefing participants in Mexico City, IFA member Ferenz Feher, CEO of Feher & Feher said, “Monterrey is not only the most Americanized city in Mexico, it is the most Americanized city in the world outside of the US”.  The state of Nuevo Leon, of which Monterrey is the capital compares favorably to Mexico City in terms of income levels, infrastructure and commercial real estate availability.  The state has grown safer over the last 2 to 4 years, driving increased foreign direct investment.  Nuevo Leon has the highest worker productivity in the country, is responsible for 11% of Mexico’s total manufacturing output and 8% of the country’s total GDP.  Nuevo Leon is the #1 center for foreign direct investment in Mexico with 65% of trade between the US and Mexico passing through the state.

The stop in Monterrey began with a lunch and series of market briefings at the InterContinental Presidente Hotel.  Initial remarks were made by John Howell, Commercial Consul from the US Consulate in Monterrey.  The US Consulate in Nuevo Leon is one of the biggest US consulates and is the #1 originator of US tourist visas in the world.  Also home to the #1 grossing Carl’s Jr. in the world, the city of Monterrey has the highest per capita GDP in Mexico- which is two times the national average.  In the district of San Pedro, the per capita GDP of $37,000 is comparable to US levels.  English is widely spoken and US culture is pervasive.  John Howell joked, “When I ask a local which soccer team is their favorite, I often hear the name of an NFL team in response”.

Next, Armando De La Fuente from Alles Group, a real estate services firm briefed the group.  De La Fuente gave a detailed overview of commercial real estate in Mexico’s second largest economy.  Numerous mixed use developments have either recently opened or are under construction, all in the comparatively competitive range of $32-39 per sq. meter per year.  He said that many downtown landowners do not want to sell to developers in anticipation of rising prices.

To conclude the briefings, Celina Villareal Cardenas, Undersecretary for Foreign Investment and International Trade for the State of Nuevo Leon and a colleague gave an in-depth report on the state’s economy.  Kia has just committed to make an investment of over $1 billion USD to build an automotive manufacturing facility and over 600 Korean families are expected to relocate to Monterrey in the next 18 months.

Mission participants were transported through streets slowed by a visit from President Nieto to tour local malls and commercial areas. On the 9th, mission attendees spent full days in matchmaking meetings.  Some attendees met as many as eight investors over the course of the day.  Title Boxing Club scored the mission’s fastest success, signing a master franchise agreement with investors from the Yucatan Peninsula on the 8th.  On the 9th, Title Boxing Club’s representative and their new licensees began meeting Monterrey investors to discuss subfranchising.

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Anthony Padulo of BrightStar Care and translator prepare for meetings with Mexican investors

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Ericka Garza of Boston’s ready to start business to business meetings with potential franchisees in Monterrey, Mexico

US Franchise Trade Mission Kicks Off in Mexico City

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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.

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Ferenz Feher, CEO of Feher & Feher gives a briefing on the Mexican franchise market

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