Overview

The Mexican market is mature and competitive but also very receptive to the franchise model. Franchises have experienced sustained growth in recent years, but this expansion has slowed due to the COVID-19 pandemic. U.S. franchise concepts are well regarded in the Mexican market due to brand familiarity, as well as the strong relationship between the two countries. According to the Mexican Franchise Association, the franchise industry is responsible for around four percent of Mexico’s GDP with more than 90,000 points of sale throughout the country representing over 1,500 franchise concepts. About 85 percent of the franchises operating in the country are Mexican brands, 10 percent are from the United States, and the remaining percentage is shared by brands from Europe and Latin America.

Despite the COVID-19 pandemic that impacted the sector, according to experts, in 2021 the franchise point of sales in country grew about five percent. About two percent of the total existing franchise points of sale closed in 2020, but most franchise concepts continued operating, making changes to their business models. The Mexican Franchise Association has been working with the private sector to help franchisors recover from this crisis and to adapt to the post-pandemic reality. This includes by incorporating technology and changing space design to comply with new health regulations Industry experts expect the franchise sector to have a slow recovery with minimal growth for the remainder of 2022.

Source: Mexican Franchise Association

The food and beverage sector represents 35 percent of the Mexican franchise market, followed by retail, personal care services, health, education, and business consulting. The franchise model has been particularly successful for concepts that do not require high investment fees. Concepts with investment fees ranging from USD 50,000 to USD 250,000 have more opportunities to grow in the market than high-fee models. In 2020 some franchise companies developed crowdfunding programs to attract smaller investors and to continue their market operations. In the last couple of years, ten concepts in different industry sectors related to franchising, have successfully achieved their expansion plans through crowdfunding, and experts predict that more local and international brands will adopt this model to finance their growth.

Traditionally, large cities such as Mexico City, Monterrey, and Guadalajara have been the dominant options for positioning a new franchise concept, comprising about 70 percent of the total number of franchises in country. Nevertheless, the development of franchise business opportunities has also been successful in smaller cities where local populations are looking for new products and brands.

Franchising in Mexico, as in any other country, requires a long-term commitment. U.S. franchisors must commit human and financial resources to develop a business plan (including market research) to identify the best strategy for growth, as well as show flexibility to adapt to the local culture. Given that Mexico is so large and diverse, it is challenging to grant one master franchisee contract to develop the entire country. It is highly recommended to approach the country on a geographic basis and grant at least three regional rights covering Northern, Western, and Central Mexico. U.S. franchisors must support the master/regional franchisees throughout the business relationship if they want to be successful. One of the main challenges cited by franchisees is the lack of support from franchisors once the agreement is signed. Close communications with partners, continual training, and regular visits to the country are important to facilitate long-term success.

Franchising Legal Framework

Franchises in Mexico are regulated by Article 245 of the new Industrial Property Law (Ley Federal de Protección a la Propiedad Industrial). A franchise exists when, in conjunction with a written license to use a trademark, technical knowledge is transmitted to enable the franchisee to sell goods or render services using the operating, commercial, and administrative methods established by the holder of the trademark with the aim of maintaining the quality, prestige, and image of the products or services distinguished by the trademark. Franchising agreements must be recorded with the Mexican Institute of Industrial Property (Instituto Mexicano de la Propiedad Industrial or IMPI).

It is also important to register trademarks in Mexico to protect brands with IMPI. According to the law, a trademark must be used by either its owner, the licensee, or the franchisee of record, or it may be subject to cancellation due to non-use. The time frame for registering a trademark in Mexico is approximately four to six months.

Franchising Association

The Mexican Franchise Association (Asociación Mexicana de Franquicias or AMF) is a private entity with over 30 years in the market. The AMF’s main purpose is to promote and develop franchising in Mexico, as well as to support regulations and develop programs with the public and private sectors to promote the industry. It is mostly comprised of Mexican franchisors and franchisees, as well as franchise consulting firms. The Mexican Franchise Association coordinates different academic programs to educate entrepreneurs about the industry, and lobbies with the Mexican government for the industry’s business interests.

Resources

Mexican Franchise Association (AMF)                                                          

Contacts

For more information on the franchise sector, please contact:

Martha Sánchez

Commercial Specialist

U.S. Commercial Service—Mexico City

Tel: +52 (55) 5080-2000 Ext. 5225

Martha.sanchez@trade.gov