Austrade helping Australian franchises south of the border

According to Austrade , for many Australian franchisors considering international expansion, the United States (US) is often considered the ultimate market to 'conquer', due to its sheer size and wealth, and potential opportunities for growth. The similar language and culture also provide a comfort factor not offered by less familiar foreign territories. While the US is certainly attractive, it is further south that conditions for franchising are hotting up and many are looking at Mexico as a key emerging market – not only for opportunities in country, but as a springboard into the lucrative US market. Mexico now has trade agreements with over 40 countries, including the US, Canada, the European Union and Japan, and has emerged as one of the world's major trading nations. It is now the eighth largest exporter in the world.

The Mexican Government has also undergone a major privatisation program over the last 10 years, de-monopolising the telecommunications system and selling off most of its airports, railways and ports. This has not only resulted in a dramatic improvement in the country's economic infrastructure, but is continuing to produce a wide range of opportunities for foreign (including Australian) investors and service providers. Franchising, in particular, has enjoyed rapid growth in Mexico – both from home grown and foreign concepts – and is becoming a dominant force in the retailing and restaurant sectors and across a range of business and other services.

Foreign systems (mainly American) make up about 40 per cent of the 500 or so systems in operation, and Australian brands are also starting to make their mark. Action International , Expense Reduction Analysts , Computer Troubleshooters , Cookie Man , Aussie Pet Mobile , Kip McGrath Education Centres and Gloria Jean's Coffees have all established a firm foothold in the market – but there's room for more.

As modern Mexico is a predominantly open market, with no franchise-specific legislation, entry barriers to franchising are low. This means that foreign firms entering the market are likely to face strong competition, both from local and other foreign entrants.

Foreign concepts will also have to compete with non-franchised, family businesses with a strong presence in some of the opportunity areas. But a high quality, reliable service delivery – the mark of a good franchise – can provide the necessary edge in the market.

Franchisors also need to be prepared to adapt their product/service offering for the local conditions. One area where a degree of flexibility needs to be exercised by Australian franchisors is in relation to pricing. At the end of the day, the Mexican partner/Master Franchisee has to recover costs and make a profit, so simply transposing the Australian pricing model onto the Mexican market is not likely to work.

Austrade Mexico is well placed to identify potential partners and assist with background checks, having worked with a number of Australian franchises in the market in the recent past.Paul Martins, Trade Commissioner in Mexico City, reports that for each Australian concept they have presented to the market they have received responses from 30 to 35 solid prospects.

As we went to print, a dedicated Australian franchising workshop was held in Mexico City as part of our Australia Festival activities in Latin America, to showcase selected systems to potential local Master Franchisees and business partners. Although companies will not be required to visit the market on this occasion – Austrade Mexico will represent them – they will need to be willing to travel to the market within four months of the event to follow up with prospective leads. This is a cost effective, entry-level initiative to take advantage of real opportunities in a growth market.