Monterrey, Mexico: Receptive to US Brands

Monterrey Mall

 

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

The Philippines Takes Center Stage with Franchise Asia 2014 and U.S. Franchise Trade Mission

 

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A panel including William Edwards, Edwards Global Services CEO and IFA Director of International Affairs Josh Merin take turns speaking to the general session of Franchise Asia about international growth.

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Mission participants enjoy a VIP tour of Franchise Asia’s Expo.

The Philippines became an increasing center of the franchising world’s attention when it hosted one of the franchising’s biggest events in Southeast Asia, Franchise Asia 2014 and a U.S. franchise trade mission. The show was originally scheduled to take place July 16-20 at the SMX Convention Center in Manila, Philippines but took place July 17-20 because of the typhoon that hit the Philippines on the 16th.  Recognized as the biggest franchise show in the Philippines each year, Franchise Asia continued not to disappoint, welcoming over 500 exhibitors, including IFA member and trade mission participant Tutor Doctor, and an estimated 50,000 attendees.

Due to the typhoon, the first day of Franchise Asia was cancelled. However, the Philippine Franchise Association’s staff worked diligently through the night to reconfigure the program. Their hard work paid off when Franchise Asia opened its doors on the morning of the 17th and soon saw its convention hall filled with hundreds of attendees from the Philippine franchise community. These attendees demonstrated the remarkable resilience of the Filipino people, by leaving their homes (many without power) and traveling through a city just hit by a typhoon to fill the hall.

The Filipino franchise market is highly mall focused due to weather and pollution. Jan Paul Custodio, Senior Director CB Richard Ellis Philippines told trade mission participants that the Philippines’ has 1/10th the real estate costs of Hong Kong or first-tier Chinese cities.  It also has the lowest mall real estate prices in Asia, 20 times lower than Beijing.  Market challenges include public infrastructure and high energy costs.  According to a US Embassy briefing, the number one drag on growth is corruption, especially outside of Manila.

Bill Edwards, Vice Chair of the IFA’s International Committee and CEO Edwards Global Services and IFA’s Josh Merin addressed the general session of Franchise Asia on July 17. In “Conquering the Global Market with Your Brand” they presented IFA and its experience with international franchising including strategy and tactics for franchising internationally.  The presentation included international development models, what to look for in an international licensee and considerations before going international.   The event included Certified Franchise Executive (CFE) classes and this year’s CFE graduation.

Trade Mission attendees were able to tour Franchise Asia on Saturday, July 19th.

Franchising Making Gains in Manila

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Trade Mission participants line up to speak during a reception at the US Embassy in Manila.

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The trade mission delegation and U.S. Embassy staff celebrate a successful event.

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From left, U.S. Ambassador Philip Goldberg, IFA Director of International Affairs Josh Merin and Senior Commercial Officer Jim McCarthy address a high-level networking reception in the ballroom of the U.S. Embassy, Manila.

As typhoon Rammasan was making its way towards the Philippines, franchise executives from all over the world were headed to make waves in Southeast Asia as IFA, in partnership with Franchise Times and the U.S. Commercial Service, led a delegation to explore opportunities in the Philippine franchise market July 17-20. Mission participants braved delayed and rerouted flights while those who arrived early relied on the Ascott Makati hotel’s generators to get them through the storm.

As the storm calmed and the sun started to shine, the mission kicked off with a visit to the historic US Embassy in Manila. With the Philippines becoming increasingly a consumption-led and service-oriented economy, the franchise sector is a powerful tool for local development. The mission allowed 14 dynamic American franchise concepts to explore the expanding Philippine market. The goal is to investigate partnership opportunities with master franchisees and area developers in the Philippines. Companies such as Edible Arrangements, Jan-Pro, Panda Express, PJ’s Coffee, Russo’s NY Pizzeria, Tilted Kilt, Title Boxing Club, Tutor Doctor, World of Beer, and WOW Café are ready to meet one-on-one with potential candidate companies that can help them expand their product to the region.

There are deep historical and cultural ties between the Philippines and the US.  Currently, there are 4 million Filipinos living in the US and 400,000 US citizens living in the Philippines.  This drives Filipino familiarity with US brands as well as an appetite for them. US Embassy employee, Kelan Evans of the Foreign Agricultural Service, referred to the US as the Philippines’ #1 supplier and consumer of agricultural goods. Kristin Keedler from the Embassy’s’ Public Affairs Section stated that there is a very positive perception of Americans and US culture in the Philippines.

While US franchises takes the lead and are welcomed with open arms, the Filipino market is shifting. According to Samie Lim, Chairman Emeritus, Philippines Franchise Association, “US franchises once dominated the Philippines, but Asian franchises are now coming in very fast.  The Filipino franchise community has grown a great deal in sophistication.” GDP growth is second only to China in the region.  This growth is projected to continue for at least 5 years and looks sustainable. “President Aquino has been an economic reformer and while 40% of the population lives below the poverty line, things seem to be changing,” stated Joel Ehrendriech, Economic Counselor, US Embassy.   With a steadily growing economy, the Philippines’ is a prime franchise market with a growing sophistication of the business community and a desire for US brands. US Deputy Chief of Mission Brian Goldbeck said, “The market is poised, you are right to look at this market now.”

Mission participants spent the day of the 18th in matchmaking meetings with potential business partners arranged by the US Commercial Service.  Companies met with as many as 12 potential partners in one hour blocks over the course of the day.  The meetings were conducted in private rooms at the Ascott Makati hotel.

Afterwards, US Ambassador Philip Goldberg hosted the delegation and leaders from the Filipino business community for a well-received catered networking reception with live music. Attendees included the Philippines’ Secretary of Finance, Cesar Purisma and Chairman Emeritus of the Philippines Franchise Association and “Father of Philippine Franchising” Samie Lim.  Ambassador Goldberg, Senior Commercial Officer Jim McCarthy, and Josh Merin, IFA’s Director of International Affairs, made remarks during the event. Merin then introduced the mission participants who each made brief remarks. Reporters from 12 media outlets, including the two largest newspapers in the Philippines visited the hotel to cover the mission.

July’s Franchising World Digital Edition Coming, June Now Available

Your business reading during the summer can now include topics trending on diversity and inclusion, as well as international development, two important areas to consider for your thriving franchise business.

FW Header09 wShadowWatch for the July issue of IFA’s Franchising World magazine that’s coming soon. Articles are designed to help your business navigate those twists and turns that accompany international development. You’ll find guidance about international data available on franchising, trends involved in franchising in Latin America, investor visas, real estate considerations and managing the translation process.  This issue also updates readers on IFA’s enhanced international program and its increased World Franchise Council engagement.

This issue also includes photo coverage of the Legal Symposium, conducted for the first time in Chicago, where it attracted more than 500 participants, as well as articles that outline the latest on franchise relations, social media and IFA’s veterans outreach program VetFran.

And while you’re waiting for the July magazine, review the June issue of Franchising World magazine that focuses on diversity in franchising that presents best practices and resources. Learn why being a diversity-focused business is no longer an option from IFA Educational Foundation Diversity Institute Chairman Carlton Curtis, Coca-Cola Foodservice vice president of industry affairs. Other industry leaders elaborate on women franchise owners and what the current economic climate means for diversity programs.

Also available, which first appeared on FranSocial’s Franchise Relations Dialogue site, is an article that has generated nearly 400 downloads: “A New Era in Franchising Continues to Emerge: Should a More Balanced Franchise Agreement Play a Role?” Authors are Aziz Hashim, NRD Holdings, LLC president and CEO and IFA treasurer; and Brian B. Schnell, CFE, a Faegre Baker Daniels LLP partner.

Check out other June magazine categories such as research, trends, multi-unit franchising and lead generation, among others.

FranSocialLogo_finalReach out to authors with your questions and comments at FranSocial.