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Latin American Market Sizzles With U.S. Franchisors

More than two dozen franchise brands visited Panama, Colombia ad Chile during a recent trade mission.

More than two dozen franchise brands and 17 companies lit up Latin America in August on a U.S. Commercial Service, International Franchise Association and Franchise Times franchise trade mission covering three stops, two hemispheres and 10,000 miles. The trade mission started in Panama City, gateway to Latin America in a city that looks like a future Miami or Hong Kong, where skyscrapers shoot up as densely as a thick carpet grass. Panama’s “dollarized economy,” a sophisticated financial sector (Citibank just celebrated 100 years here) and an appetite for U.S. brands have led some to call it “Little America.” With U.S.-style electrical outlets, a population that visits the United States often, and a foundation of franchising, trade mission participants reported that the country is a golden opportunity for unrepresented franchise brands.

“We met with people who have fundamental knowledge of the value of franchising and have seen the success of U.S. franchises in this market and are very interested in these opportunities,” said Scott Chorna, director of new international business development for FOCUS Brands, reporting on the first day of deal-making. “It’s a sophisticated, pro-American, developed market, but still ripe with opportunity.”

Panama’s unique position as a logistics and transportation hub between North and South America and the Pacific and Atlantic oceans make the country even more attractive. An expanded Panama Canal is set to open next year, just when a new U.S.-Panama Free Trade Agreement is set to take effect, dropping tariffs and other barriers to bilateral trade.

“It will make U.S. imports 15 percent cheaper,” notes Fred LeFranc, CEO and founder of Results Thru Strategy, who is advising specialty sandwich brand Which Wich on its international expansion. “That will fuel franchise development.” The economy of this nation of 3.5 million is expected to grow at a hot 6 percent annually over the next several years.

Rogelio Martinez, vice president of international franchise development for Tutor Doctor, was impressed with the potential master developers he met. “The candidates were well qualified,” he said. “This is the event with the most high-quality candidates I’ve ever seen.”

Bogota, the stylish capital of Colombia, this stunning Latin American country, was the next stop, perched 8,000 feet above sea level, at a much greater elevation than mile-high Denver. The city’s altitude, trade mission members said, may hint at the heights U.S. franchising can reach in this booming country of more than 46 million.

RadioShack made national news during the trade with a ribbon-cutting at its first store in Colombia. It didn’t hurt that the Deputy Chief of Mission at the U.S. Embassy here, Perry Holloway, wore the RadioShack uniform as a store employee early in his career and continues to be a fan. “Can we look around the store?” he asked, waving off reporters and other officials during the visit as his eyes crawled over walls of gadgets and electronic gear.

“Wherever a battery is sold, we’d like it to be a RadioShack battery,” said Marty Amschler, vice president of global franchise for the company. “Batteries are universal, like many of our products,” Amschler adds. He and his partner Benjamin Simon, senior director of international development, have spearheaded global development for the electronics powerhouse, establishing a significant footprint and revenue streams at a feverish pace.

The trade mission got an extra charge from Nicole DeSilvis, Commercial Attaché at the U.S. Embassy in Bogota, whose thousand-watt smile led the 25 brands, all IFA members, into the tony El Nogal Club–12 stories of luxurious meeting rooms, restaurants, an Olympic-size indoor swimming pool, world-class fitness facilities and an art gallery.

Despite challenges like security and lingering poverty, Colombia is the fourth-largest oil producer and the number-one coffee producer in Latin America, with an economy that expanded by 7.7 percent in the third quarter of 2011, projecting growth of nearly six percent this year. In the El Nogal Club, the fruits of the expanding economy could be seen, with Hermès ties almost standard and a suit-and-tie-only dress code reflecting Colombia’s formal business culture.

Bogota was a big hit for FOCUS Brands, whose Latin America development will now be spearheaded by Keith Carleton, CFE, director of international business development. Scott Chorna continues in a similar role focused on Asia, the Middle East and Africa. “We’ve been pleasantly surprised not only by the number of appointments, but the quality of the prospects,” Carleton said.

The hunger for U.S. food brands is so strong that Hair Parra, vice president of international development of Wing Zone, signed a master franchise agreement for the country before the trade mission ever touched down in Bogota. Investors contacted Parra, an owner of the company, after reading about the trade mission and contacting U.S. Embassy officials.

“The groups we’ve seen have been very good,” Parra said. He estimated that 90 percent of the candidates interviewed in Colombia were qualified.

“The excitement in U.S. franchising that this mission has stirred has been exceptional and we look forward to riding this wave as far as it will take us. Franchising is on the tip of everyone’s tongues right now and the U.S. Commercial Service, IFA and Franchise Times are proud to have spurred this flurry of interest in the South American market,” said DeSilvis.

Santiago, Chile, prone to occasional earthquakes, was next. But what shook up the prosperous, stable nation in August was the trade mission, arriving in a country with the highest per capita income in South America and a growing, diversifying economy.

Tony Valles, vice president of business and concept development for McAllister’s Deli, believes the country is more than ready for a franchise boom. “We came on the trade mission because we’re getting steady interest from Latin America. In the past, we took a more opportunistic approach. Given the potential of these markets, we want to take a more strategic approach,” he said.

Home Instead Senior Care President Jeff Huber jetted in to join Senior Vice President and COO of Global Operations Yoshino Nakajima for a back-to-back set of meetings in Santiago.

Huber majored in English literature and also earned a law degree from Jesuit-run Creighton University in Omaha, Neb. before clerking for a federal judge and practicing law on the way to Home Instead, where he became president and COO two years ago. “For me, it’s about being of service,” he said. “We provide very personal care to vulnerable people in the sanctity of their homes. You need a high level of commitment and passion to do that well.”

As such, Home Instead looks for a special kind of business partner. But that hasn’t hampered international growth: The brand operates about 1,000 units in 16 countries, so far.

Growing at about five percent per annum, Chile, with 17 million people, has the highest per capita income in South America–equivalent to Russia and Malaysia.

By 2016, all tariffs on U.S. goods in Chile will be phased out, thanks to a 2004 bilateral trade agreement, further improving the attractiveness of U.S. products. Seventeen percent of Chile’s imports already come from the United States–with import growth surging each year overall.

Ray Hays, senior director of Edwards Global Services, said his clients, BrightStar Care and Sport Clips, Inc., will benefit from the growth in Latin America. “In the case of BrightStar, it’s pretty clear where they fit. It’s the type of brand that is attractive and needed,” Hays said, adding, “It’s important for a master franchisee to know the regulatory and medical sector in the country.”

About Sport Clips, Inc., “People see it and they just get it,” he said. “The response has been, ‘This is something we could really use here.’ They have very few options for men’s hair care. The barber trade is disappearing. The franchise is able to offer more for a similar price and dominate the market.”

“The 2012 International Franchise trade mission to South America exceeded Global Franchise Group’s expectations in every way,” said Chief  Development Officer John Barber, joined by Santiago-based international franchise consultant and former IFA executive Marcel Portmann on the trade mission. “We could never have scheduled this productive a trip without the help and support of the U.S. Commercial Service, the International Franchise Association and Franchise Times.”

“For anyone still thinking that South America is a future possibility for franchising, I encourage them to rethink their position,” said Don Burleson, executive vice president of Jani-King, “because the opportunity exists now.” ⎯

Beth Solomon is vice president, strategic initiatives & industry relations for the International Franchise Association. She can be reached at 202-662-0789 or bsolomon@franchise.org.

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