Delichurros, Wins Army, EPS Servicios Automotrices and BodyBrite are franchises that have managed to take advantage of Mexico's good reputation abroad.
12 min read
The opinions expressed by collaborators are personal.
Growing through export is one of the paths that many companies take to fulfill their expansion strategies. In the case of the franchise sector, more than 900 brands operate in Mexico, of which 85% are national and 15% foreign, but only 21 of the first operate in foreign territory, according to the Mexican Franchise Association (AMF) . There is a long way to go and many opportunities.
Mexico is the second largest Latin American market in number of national franchises, after Brazil, but “it does not have a high level of presence abroad,” says Gabriel Grasiuso, president of the Ibero-American Franchise Federation (FIF) , made up of industry associations in 12 countries.
Among the main reasons why there is no growth abroad is that the Mexican market (made up of 125 million inhabitants) is quite large and it takes companies a long time to meet regional and national demand, which “inhibits desire to expand abroad ”, assures José Roberto Fernández, president for Mexico, Colombia, Central America and the Caribbean of the consultancy Francorp .
Another factor is that internationalization is not as simple a process as serving an order in another country, says Gabriel Grasiuso. “A strategic plan is needed, and today in Latin America there is not enough preparation to take this step.”
Before exporting, brands must consider several factors, among them, says Gabriel Grasiuso: identify the franchise's potential to adapt to the target market and put together a tropicalization strategy, without modifying the business model.
Other important factors, adds José Roberto Fernández, are preparing the value proposition, choosing a model to grant the franchise (either through an area developer or a master franchisee), knowing the business culture of the destination country, making a cost analysis, anticipate how international assistance will be carried out and, most importantly, review the legal and tax considerations of each country.
For these two experts, when talking about exports in Mexico, it is thought that the natural destination is the United States, but the greatest opportunities are in the Ibero-American market (Central, South America, Spain and Portugal), where there are more than 684 million people in 23 countries, according to data from The World Factbook , an annual publication of the United States Central Intelligence Agency (CIA).
The advantages that can be found in these markets are the language, the culture that allows an easy tropicalization of concepts, very interesting tax systems for the landing of franchises, and stable and mature economic destinations, says Gabriel Grasiuso.
If you are interested in learning more about the opportunity that exists in this region, four brands share what their experience was and give us some advice to take into account.
Type: Food and Drinks
Export destinations: South Korea, Japan and China (40), Colombia (14), Argentina (4), Costa Rica (5), Peru (1), the United States (4) and Germany (1).
This franchise emerged in 1985 in Ciudad Juárez, Chihuahua. Their value proposition is a patented recipe, developed at the National Autonomous University of Mexico (UNAM) and the University of Texas, in the United States, with which they have created different versions of churros (Spanish and filled) that accompany products such as gelato (Italian cold dessert) and sorbet (semi-frozen dessert).
Alfredo Malagón, CEO, says that due to the 2002 South Korea / Japan Soccer World Cup, the company ventured abroad, at the invitation of the Mexican government, which helped it process the license. In Germany 2006 they repeated the experience, but it was from 2008 when they began to arrive with greater force in different destinations. “Every year we went to international fairs and every two years we set a goal to conquer a country and consolidate it,” he says.
“Churros are a product that exists in the Latin American market in one way or another, so our arrival in this region has taken place naturally,” explains Alfredo. Regarding the success of his strategy, the businessman attributes it to the fact that before going to sell or place an order, “we made satellites of our corporate”, that is, they created a company abroad to give guarantees to customers. This, with the support of specialized franchise offices that have legal and fiscal alliances in different countries.
Among the challenges they have had to face when exporting is a demand for industrial property in Argentina, whose government ruled two years later in favor of Delichurros and revalidated its concept. In Peru, for the flour formula to enter its territory, at the beginning the tariff was 65% and in order to balance things, for three years the company opened its own production plant for this input in Pachuca, Hidalgo, and they have become exporters of it.
Today, the firm seeks to continue growing in Mexico and is considering opening a franchise in Iceland (a country where it is cold all year), by the hand of some Mexicans who live there.
Type: Personal care
Export destinations: Mexico (93), Colombia (80), Canada (1), the United States (21), Spain (6) and China (15).
This Spanish franchise, specialized in beauty care, arrived in Mexico in 2012 and today offers more than 15 treatments such as photoepilation, photorejuvenation, hair oxygen therapy, phototherapy and antiaging. It also has a line of premium products.
José Miguel López-Frade Martínez, director of Operations of the brand, says that when they arrived in Mexico there was not much offer in health care, and between eight and nine competitors emerged, which today have disappeared.
The reason BodyBrite has survived and shown growth is because it has very well defined values, José Miguel shares. “All the treatments we do are non-invasive, painless and offer results from day one. Our goal is to bring out the best in people, but not change them. ” Another important characteristic, highlights the businessman, is that his service is based on technology that guarantees quality.
That is why one of the key points of internationalization is finding the right partner, says José Miguel. “It is vital that he knows the local market where he wants to open a new branch and that he shares our values.” In fact, he says, there have been many opportunities to open in other countries, but they have not materialized because they need to be 100% convinced that their partners have the same level of commitment, values and vision as they, because “the franchise business it is not to sell them but to make them work, that the franchisee feels protected and supported all the time ”.
Another essential aspect, says José Miguel, is to be humble and not go with a mentality of “conquering” another country, because the important thing is to adapt the business to that other market. “If I had to give one piece of advice it would be: listen to what the people who live there say, how they see their market, how the economy is doing and try to adapt.”
Today, BodyBrite sees an opportunity to expand its business to Peru, El Salvador and Chile.
Line of business: Service
Export destinations: Costa Rica (1), Chile (2), Spain (2) and the United States (1)
This is a Mexican franchise dedicated to preventive and corrective maintenance of all brands and types of cars, it has been in the market for 20 years and has 40 service centers in the Mexican Republic.
The internationalization process began because Fernando Cortés, founder and director of the brand, was invited in 2018 to a franchise expo in Costa Rica and there he sold the first center they opened abroad, through a unitary franchise. A short time later they learned that it was better to do it through a master franchisee who developed the territory with projects to open up to 50 centers in a given period.
Opportunities to open up in other countries came with Mexicans who have emigrated for personal reasons. “They have left with us, they invest through contracts
Mexicans, we have them as partners to tropicalize the concept and we get to work together where they have friends, family and have had close contact with the market. ”
Fernando Cortés shares that the two main challenges of exporting have been the legal issue and idiosyncrasy. First, because each country has its rules and you have to know them quickly. “It has helped us to belong to Front Consulting International (FCI); We have the possibility to learn fast together with them. ” And second, because although vehicles and car repairs are the same throughout the world, some names of repairs and the way people consume change. “In Costa Rica they like to do their services little by little and on several visits. It is not like in Mexico, that people leave you the car so that you can check everything and do not come back in six months. ”
For this businessman, the opportunity in Central and South America is in services, since he considers that Mexico is 75% more advanced in this area compared to other countries in the region that are only 45%. “There is a long way to go.”
In early 2020, EPS® Servicio y Automotriz managed a crowdfunding round with Play Business to open five workshops in Mexico City and has applications in Colombia, Peru, Guatemala, Puerto Rico, El Salvador and Ecuador. Its objective is to achieve this year in two or three countries.
4. Wing's Army
Line: Food and drinks
Export destinations: Panama (2) Colombia (1) and Spain (1)
This Mexican wing restaurant, with a military-style setting, was founded in 2005 in Guadalajara, Jalisco. It is a culinary concept that originated in Buffalo, New York, and was brought to Mexico by Martín Santaella, who lived for seven years in the United States studying the market and learning all about the food and beverage businesses.
Today, Santaella heads the holding franchise MASO en Expansión, which has seven brands of different food concepts: Wing's Army, Glücklich Cochi, Bier Garten, Jack's Crab House, Force Fries, Pitypolski Pub and Lighthouse.
Wing's Army started its internationalization process in 2014 because its founder attended exhibitions in different countries and realized that people were looking for Mexican concepts. “In Central and South America they admire us a lot, they welcome us with open arms, among other things for the richness of our gastronomy, which is not equal to that of any country; I even dare to say that we are above oriental food (Japan, China and Korea) and Peruvian. ”
The businessman shares that if he could give a route for the internationalization of a concept it would be: carry out a market study that helps you to know the idiosyncrasy of the population and be accompanied at all times by a person native to the destination country to guide you in the processes.
The model by which Wing's Army chose to expand is through partners who want to put the first unit abroad, Wings Army puts the know-how or the operation and then “we go together to grow and sell more franchises.”
Regarding technical assistance, Martín Santaella ensures that when they open a franchise they send two people who are supporting the operation all the time and who carry out quality control to review how the new units are operating.
Wing's Army's plan to grow includes consolidating the unit in Colombia, which will function as an initial test of 10 branches that same partner would operate. They will also seek to enter Peru and Spain. “We want to plant a seed in every country in the world.”