Franchise Sector in Mexico

An Expert's View about Franchising in Mexico

Posted on: 31 Aug 2012

Summary

. In spite of challenging economic circumstances, the Mexican franchise sector grew between 9 - 12% in 2011, demonstrating it as one of the most important sectors in the country´s economic growth. Conservative estimates indicate that this sector will grow at least 8 percent in 2012.

Mexico is among the top ten countries worldwide in franchise development, due to the number of concepts operating in the market, a strong legal framework as well as support from the government to continue developing new business opportunities. According to the Mexican Franchise Association, Mexico has over 1,200 franchise concepts, including many international brands, most of them from the United States. Mexico offers opportunities to U.S. franchise companies interested in exploring the international market, and serves as a stepping stone to opportunities in other Latin American markets.

Market Demand

With its strong commercial ties to the United States and a general recognition and acceptance of U.S. brands by the Mexican population, Mexico is a natural path for expansion into Latin America. Since the arrival of the first international franchise concept to Mexico over 20 years ago, food franchises have continued to show solid growth. This sector includes quick service and fast casual restaurants offering different international food concept franchise options to Mexican entrepreneurs.

The services sub-sector has also been growing significantly in recent years, responding to increasing demand.Franchise concepts such as services for children (education, entertainment), and personal and senior care services among others have good market potential for many years to come.

Traditionally, large cities like Mexico City, Monterrey and Guadalajara have been the first location of choice to open a new franchise concept. Nevertheless, smaller cities have been successful in developing franchise business opportunities. This trend is due to local populations looking for new products or brands, including international concepts.

Market Data

Over the last few years, Mexico has developed a robust franchise culture. While a non-franchise business in Mexico has only a 40% chance of surviving more than two years, 95% of franchised businesses still operating in Mexico have been established for more than five years, demonstrating the endurance of established brands. There are currently over 1,200 franchises registered in Mexico, with 70,000 points of sales generating about 800,000 jobs.

According to the Mexican Franchise Association, about 80 percent of franchises operating in the country are of Mexican origin, 10 percent are from the United States, 3 percent from Spain, and the remaining 7 percent of the market is shared by Canada, Central & South America and Europe. Firms from other Latin American countries are finding Mexico to be their best option to expand internationally, and are focused on exploring secondary markets.

Best Prospects

Mexico offers numerous opportunities for a wide variety of firms looking to expand into a new market.

Food Industry:

Today, changes in lifestyle have resulted in an increase in the consumption of fast food. The total market for the fast food industry is around US$ 2 billion dollars a year, and is divided between:

- Pizza restaurants: 37 %

- Hamburger restaurants: 30%

- Others: 33%

Thanks to a growing population, total food consumption is expected to grow at an even faster rate, increasing between 20 and 30% next year. Almost 55% of the population is below 25 -- one of the highest percentages for an upper-middle-income economy anywhere in the world.

New trends in the food/restaurant sector include upscale dining restaurants as well as healthy food franchises.

Senior Care Services:

Lifestyle changes, economic conditions and the arrival of new systems and products that can improve the quality of life for senior people, have changed the profile of this market and its future development. The retirement sector is divided into five service categories; active adult, independent living, assisted living, memory care, and nursing care. Currently all five retirement community types are operating in Mexico.

Home care services

Integral home care service is gaining importance in the market, as most large hospitals in major Mexican cities already have an organized integral home care service for patients that prefer the comfort of home.

Senior care services

Market potential in the senior care sector has attracted the attention of many groups that have identified a good opportunity to do business in this niche market. Some senior care institutions are expanding services to offer medical attention, supervision and other services for patients. Additionally, investment groups are constructing residential retirement projects with integrated services including medical and home care services.

Education Services:

Growing demand for childcare services is due to rising female participation in the labor market, and busier working schedules among parents. Additionally, increasing importance attached to early socialization and good quality educational services for child development has increased growth. To satisfy this growing demand, a wide range of child services is currently available, especially in large cities. Early childhood centers, fitness programs, and specialized programs in areas such as math and language have also become very popular franchise opportunities.

Read the full market research report


Posted: 31 August 2012

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