Latin America is a treasure chest of opportunities for franchise concepts looking to expand their global footprint. Rich with culture and tradition, Latin America offers a sufficient number of strong or developing economies to merit inclusion in any international expansion plan. However, its diversity of cultures can be overwhelming and finding out how to successfully enter the market takes time and careful consideration. Franchise concepts focusing on a region that includes Central America, South America, and the Caribbean are already enjoying success, but newbies need to understand that to achieve such success, expansion must be purposeful and calculated. It is very important to pay close attention to translating the concept into these unique cultures.
DEFINING THE MARKET
Most Latin American countries have only begun to embrace the franchise model in recent years. Many of these countries are beginning to realize the benefits to economic growth and higher employment that franchising brings and some governments are offering financial support to brands looking to franchise with them. Easy travel, improvements in communication and improved franchising awareness are making it much easier for companies to go global.
THE PATH TO OPPORTUNITY
The range of opportunities offered throughout Latin America is broad and growth rate there is notably strong. Brazil has tripled its revenue over the past decade as the middle class continues to grow and increased earnings lead to more disposable income and meals taken outside the home. Other Latin American countries posted year-over-year double-digit growth in the franchise sector for both home-grown and foreign concepts.
The first action item when plotting your path to Latin America is to identify the countries that have the right cultural fit for your brand and those with economies strong enough to support a new concept entering the market. Strength of economy is a point that conveys different meanings to different franchise concepts and industries. Does your concept focus on a local, loyal, native customer base? Does your concept rely on heavy tourist markets? Is the price-point of your products or service in line with what the market will withstand? First, understanding which markets will get you closer to a solid strategy of market entry.
LOCALIZATION
It would be a mistake to think you could enter the market without making some adjustments for local needs and traditions. Even big brands like McDonald’s and KFC allow their franchisees to do some localization. Market research and in-market evaluation should yield the results you need to develop your strategy and decide what needs to change in your concept’s offerings. Do your product offering, brand, logo, name, methods, and processes all translate? Take, for example KFC’s introduction of a Creamed Corn and Chicken Sandwich to suit tastes in Brazil, or the company’s provision of silverware in Sao Paulo to address the local distaste for eating with your hands. Or consider the McPinto at Costa Rican McDonalds (a traditional black beans and rice with fried plantain, eggs, and vegetables). Be sure to understand these cultural differences and what you will need to localize in order to ensure success in the market without compromising the integrity of your brand.
CHALLENGES
Not every franchise will succeed in Latin America. Markets in this region vary widely in their buying power, as well as in their ease of doing business. Consumer tastes and needs vary across nations and not all markets are created equal. Along with seemingly endless opportunity throughout many countries in Latin America, there are some serious challenges. Many of these markets are rapidly-changing and finding the right partner to lead your brand into the market is key. Though most major countries in Latin America have shifted their focus to welcoming foreign franchise concepts, expansion into this diverse region does not come without its hurdles.
High on the list of common mistakes many franchise concepts make when looking at Latin America is not realizing the extent to which cultural differences matter and how they vary not only from one country to the next, but within different regions of each country. Understanding that each country has its own traditions, nuances, languages and needs is key to success in each market. Though the term ‘Latin America’ encompasses many countries, a one-size approach to the region is certain to fail.
Localization of your brand will be different for each market, as will the methods to finding the right qualified franchisees. A well-equipped, well-educated development, operations and support program staffs focused on understanding these differences will lead to years of success and growth in this amazing part of the world. Due to political and local problems, not all countries should be targeted for expansion at this time. Market research into such factors as personal safety, ability to take money out of the country and the availability of qualified workers should be carefully considered. In some markets in this region an American concept could be a political target. These are all factors that should be part of your overall strategy as you determine which countries warrant focus for expansion into Latin America.
THE FUTURE
With a combined population larger than the United States, Latin America is a wise and deserving choice for expansion for many international franchise concepts. Patience is crucial when entering any new market and Latin America is no exception. Taking the time to explore the opportunity in each of the markets and having a strategy that caters to the diversity of their cultures is essential.
When executed properly, you will find the right franchisees in each market, enjoy the rich traditions of each new culture, and become a part of this ever-changing, ever-growing region. As a region comprised of 33 countries ranging from Brazil with over 211 million in population all the way to the island nation of Saint Kitts and Nevis with its population just over 56,000, the approach needs to be tailored to each country to maximize success and build your brand in these most promising markets.
ABOUT THE AUTHOR
Justin Livingston has worked for more than a decade in franchising, joining the team at Coyote Ugly Saloon as Vice President of Global Development to develop and implement the international franchise program which currently operates in seven countries.
