Franchising Is A Strong Business Model in Mexico

Roberto Litwak

Date

Jun 05, 2016

I have been a 75,000 – 100,000 mile-per-year business traveler for quite some time now, and very fortunate to have had the opportunity to work in and visit many countries in all 5 continents, but it took a recent trip to Cabo San Lucas, Mexico with my family this past Spring Break, for me to fully realize and grasp “how international” is International Franchising, and how prevalent is franchising overall.

My daughters (8, 11 and 13) and I, usually play a game where they try to guess if a product or service we consume comes from a franchised business (because dad works with franchises). Our trip was no exception…

Landed in Cabo, and rented a car from a Franchise, we checked-in at the Hotel, also a Franchise, and of course, the girls were hungry so we went into town for a bite to eat…we must have counted at least one dozen franchised restaurants in the couple of blocks we walked. We all like Mexican food so we stopped to eat tacos…Franchised restaurant, and on our way back to the hotel, my lovely wife realized she had forgotten to pack sun-screen so we went to a convenience store to purchase one, the store, a Franchise - and that was only the first day. I must have heard my daughters say, scream and whisper the word Franchise while pointing at an establishment more than 100 times during our 4-day trip.

Franchising (including International Franchising) is an incredibly strong business model in Mexico.

There are over 1,400 franchised brands in the country close to 80,000 franchised units which provide approximately 1,000,000 jobs. Based on the number of brands, Mexico ranks 4th in the world. 85% are national-born brands, while the remaining come from the U.S. (8%), Europe (3%), South-America (2%) and other countries (2%). For those businesses that supply the Franchising Industry in Mexico there is a ratio of 82% domestic, 18% international.

In terms of economic performance, Franchising accounts for 6% of the GDP and $0.15 out of every peso spent in a Franchised business. It is one of the few industries in the country that has enjoyed sustained and continuous growth for the past 7 years, with double-digit growth in several of these.

Franchising in Mexico is regulated by the 1991 Industrial Property Law and has disclosure requirements in the form of a Franchise Circular commonly known as the C.O.F. and of course, a Franchise Agreement. The Mexican Franchise Association (www.franquiciasdemexico.org) is an influential non-profit organization dedicated to develop and promote activities to better conditions for the Franchises in Mexico. They are sponsors of the Feria Internacional de Franquicias every March in Mexico City, a Franchise Expo that unites more than 350 brands and close to 40,000 visitors every year.

These are just a few examples of successful U.S based Franchises that have an important presence in Mexico:

  • McDonald’s – 400 Restaurants, 500 Dessert Kiosks and 27 McCafé with annual sales of $25.4M USD.
  • Subway – 1,000 units generating $11.5M USD in revenue.
  • KFC – 319 Restaurants with sales of $26.5 M USD.

So it turns out that my daughters were mostly right, and Franchising has gotten it right when it comes to finding Mexico as a solid opportunity for growth.

Sources: Mexican Franchise Association, Forbes Magazine (Mexico) and Annual Reports.

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