Latest Trade Mission spreads the good news in Latin America about doing business with U.S. franchisors
Before Wing Zone’s VP Hair Parra’s flight landed in Colombia, before he even sat down with his first one-on-one interview arranged by the local U.S. Commercial Service officers, the Franchise Times/IFA/U.S. Commercial Service Trade Mission to South America had already delivered a franchise sale for his Atlanta-based concept.
Panamanian Franklin Vergara, who now lives in Colombia, saw an ad announcing that the upcoming South American trade mission was seeking qualified investors to meet with U.S. franchises, and contacted Parra directly. While the other 23 companies were just getting started interviewing prospects on the first leg of the trip in Panama, Parra had already flown to Medellin, Colombia, to meet with Vergara and his family, whose investments are in real estate and the medical industry. Vergara had eaten at the chicken-wing restaurant in Panama and was already familiar with the concept.
By the time the trade mission had progressed to its last stop in Chile, an agreement for 27 units in five years was signed and the money had been “dropped” —wired into Wing Zone’s account, Parra said proudly.
Wing Zone may be the trade mission’s first success, but it won’t be the last.
The quality of the candidates on this trade mission was the best Scott Chorna, director of international new business development for Focus Brands, has seen. Better than India; better than Vietnam and Indonesia. That observation was reiterated several times during the six-day mission by the other participants. A little over a month after the trade mission, Rogelio Martinez, vice president of international franchise development for Tutor Doctor, sent an email to the group announcing he had closed deals in Chile and Panama and was expecting to close another two deals in Colombia and two more in Chile the following week. More deals for the other companies are sure to follow.
Each of the trade missions have had their own personalities. One of the main differences in this trade mission from the previous two Franchise Times co-sponsored was the majority of the candidates did not speak English and the majority of the franchise sales executives did not speak Spanish. Paid interpreters hired by the local U.S. Commercial Service staff provided the bridge over the language gap. In addition, the dress code was more formal for Latin America: suits and ties, no logo’d golf shirts. When traveling between the countries, however, jeans were back in vogue.
Three countries in six days is no tranquil feat. It’s hours of having to be on your A-game, talking to people both qualified and not so qualified. But participating in a trade mission saves a company thousands of dollars and hundreds of hours—a full year of research if one attendee’s estimation is to be believed—especially if they try to accomplish the same deep dive into the culture as a trade mission provides.
What follows is a country-by-country description of the highlights of the trip.
Panama City, Panama
Prior to the matchmaking meetings and briefings, those of us who arrived in the country early inevitably wandered toward the ocean to walk the long pathway from the new city to the old Panama City. Amidst a backdrop of modern skyscrapers, vendors canvassed the meandering walking path along the ocean. Due to the heat and humidity, the most popular item being sold was the local favorite, exotic-fruit syrup poured over shaved ice. It was served in a small cup with a spoon, rather than slurped through a straw. One size, fit for all—no supersizing. The vendors traveled in three vehicle styles: a double-wide shopping cart that’s pushed; an oversized basket on the front of a bicycle where family-sized, prepackaged snacks hung over the sides of the basket like fringe; and a rusty, parkable cart with a large umbrella to provide shade for the ice bucket.
There is not much free time built into a trade mission, but because the meetings started on a Monday, many of us flew in over the weekend. On Sunday we toured the Panama Canal, the 48-mile-long international waterway that connects the Atlantic and Pacific oceans, saving ships an 8,000-mile trip around South America. A second set of locks being constructed next to the first will allow newer, larger ships to take advantage of the shortcut. As 12 of us rode there and back in an eight-passenger van and then all tried to fit into the same elevator, we remarked on what a close group we had already become. By Chile, we were finishing each other’s sentences.
In Panama the sun rises in the Pacific Ocean and sets over the Atlantic. Its economy is also the opposite of the United States’. While Panama uses the same currency as the U.S., it never dipped into a recession. It has a stable economy—which was described as booming by several speakers throughout our time there—stable political environment and a sophisticated banking system, our speaker from the Panamanian Chamber of Commerce told us. The city’s goal is to become another Singapore, a well-appointed gateway of opportunities into the region.
The challenges? Security could deteriorate and the labor laws aren’t flexible, the official said. The Panama Canal brings millions of dollars into the economy, and an expansion project promises future riches when larger ships can use the oceanic shortcut, but it also limits geographic growth by creating bedroom communities, which cause traffic problems as well as urban flight. But on a positive note, the most expensive mall in Central America was being built in Panama City, with ample opportunities for leases.
The local U.S. Commercial Service office here is small, so in order to apply more muscle to the event, staff teamed up with the Panamanian Chamber of Commerce. The one-on-one interviews were held at the chamber’s building. A private bus picked us up from the modern hotel and dropped us off at an older building in a busy neighborhood. A guard greeted us at the locked door. In the large hall, separate tables had been set up decorated by vinyl signs with the company’s logos pinned to the table skirt. Prescreened prospects were then escorted to the tables to meet for a set time with the franchise execs.
Like elsewhere in the world, concepts coming to Latin America have to be adapted for its particular consumer. Most of the adaptation seems to be in the food sector; however, Rogelio Martinez of Tutor Doctor said Latin American business owners don’t like the idea of home-based businesses. Since his is such a business, he gets around that negative by suggesting prospects rent a small office to work out of, rather than convert a bedroom or commandeer the dining room.
The 4 p.m. deadline to return to the hotel to get ready for the reception that evening was disregarded when the number of people requesting meetings with the franchisors delayed the departure for some. But none of the franchise reps complained.
The reception featured a two-piece band with a singer and an abundance of artfully arranged finger foods. A steady stream of business people and local dignitaries came and went. Two hours late to a party is acceptable in Latin America, we were told. So our hasty arrival wasn’t rude.
A few hours later, we were somewhat rested and headed to the airport for an early morning flight to Bogotá, Colombia, our next stop.
This current generation of Colombians must have forgotten the U.S. government’s role in helping free Panama from Colombian rule back when an intercostal canal was being proposed, because like the Panamanians, Colombians have an affinity for U.S. goods and services.
During a luncheon sponsored by a local bank, we were given an overview on the political, social and economic state of the country. It’s not often that an overview on a country’s business climate includes a PowerPoint slide extolling the fact that kidnappings are down significantly this year from previous years. But Colombia has an image problem both its business leaders and government are trying to dispel.
Ironically, so does the U.S. The previous night at a reception, one of the U.S. Commercial Service officers mentioned his spouse was concerned about him going to the U.S. because of our violence—two mass shootings that had dominated our airwaves made the headlines in Colombia as well.
Other facts we learned from local legal counsel: There’s no disclosure law in Colombia; franchise agreements don’t have to be registered; and parties can determine their own choice of law, although Colombian law is chosen most often. In addition to the bustling capital city, there are four other main trade areas in Colombia, all with different personalities. For instance, Medellin, the second largest city in the country, is a textile hub known for its international fashion shows. And Barranquilla, a port city near the Caribbean Sea, has become the “it” city because of gas and oil, Nicole DeSilvis, a U.S. Commercial officer in Colombia, said. One of the best, but certainly not secret, weapons franchising in Colombia has at its disposal is DeSilvis and her team. After two years at the post, DeSilvis says, “We truly believe in franchising.”
A guard outside El Nogal Club with his bomb-sniffing dog.
In order for a trade mission to stop in their city, the U.S. Commercial Service officers must be willing to take on the task, said Kristin Houston, senior international trade specialist who aptly coordinated all the moving parts of this event. Franchising was not the only trade mission on Colombia’s docket. DeSilvis’ team also dealt with earlier and later trade missions for private equity and the National Gay & Lesbian Chamber of Commerce, plus a Las Vegas trade show looking for exhibitors.
U.S. Commercial Service executives rotate through the countries, staying two to four years at each post. Because they will never have the breadth of knowledge the locals do, the experts they hire to be part of their team are the heart and soul—and the bread and butter—of the post. They’re also the institutional memory. “We sell their knowledge,” DeSilvis says. “If I’m a U.S. company, why do I want to hear about the (Colombian) auto industry from another U.S. person? I want it from the local trained workforce.”
DeSilvis’ tenure in Colombia extends to before and after the free-trade agreement was signed. Local businesses were eagerly anticipating the overdue passage of it, she said. So much so that once it did pass, merchants posted signs in their windows with the pre-agreement prices versus the lower post-agreement prices.
A company that is already reaping the rewards of the passage of the trade agreement is RadioShack. The electronics-accessory store celebrated the grand opening of its first store in Bogotá during the trade mission’s stop there. Vice President of Franchising Marty Amschler flew in for the official ceremony. The merchandise will all be RadioShack’s private label. Since books are expensive in Colombia, “We need to get Kindles, iPads and e-readers in here,” Amschler said, looking around. “We need to get the youth in here…to be contemporary.”
Colombia is home to several of its own franchises, including Totto, a wallet and backpack retailer with stores in the U.S., and El Corral, which is referred to as the Colombian McDonald’s, although one member of our group commented that it looked like it had copied Wendy’s style from 20 years ago.
At the reception later that evening at El Nogal, a business club where the trade mission participants stayed, U.S. Ambassador to Colombia Michael McKinley said with the new changes in government, a free-trade agreement and a growing middle class, “the economy is ready to accept franchising.” Other countries such as China, India and Brazil are already making inroads into Colombia, he pointed out. “This is not a backwater opportunity. The time to look at this market is ripe…this is a place where America has an open door,” he told the group.
El Nogal Club was more than a swanky place to spend the night. It’s a business club, where high-level business gets done, according to DeSilvis. Her staff enlisted management’s help in recruiting qualified business partners from its database to meet with the participants. Plus we were safe and well cared for there.
After a full day of meetings, we packed our bags and met in the lobby to be escorted to the airport for round three.
Getting into Chile is a hassle, especially if you arrive via the red-eye flight. At the Bogotá airport, the inexperienced airline employee held up the line trying to find the flight number for my flight leaving Chile four days later. Obviously, they didn’t want me to stay. Once we arrived in Santiago we had to wait in an additional immigration/customs line to pay a $160 reciprocity fee—a pay back because the U.S. government requires that same fee from Chileans entering the U.S.
Our flight landed at 5 a.m. and we dragged our increasingly more abundant dirty laundry onto a bus to the InterContinental Hotel in Santiago. We had the morning to sleep or investigate the city before the meetings started once again. In Chile, Jeff Huber, president/CEO of Home Instead Senior Care, and Yoshino Nakajima, senior vice president and chief operations officer of global operations, joined us for their only stop on the mission.
Chile is not the stereotypical Latin American country, we were told by our hosts. It’s not a large market—just 17 million people—but it has a stable economy and a relatively peaceful government transition during the last election. It ranks above the U.S. for anti-corruption on the Transparency International Index. And it’s a long drink of water—2,800 miles long and just 100 miles wide along the Pacific Ocean. Its main exports are wine and copper. Before returning home, several of us took our newfound thirst for knowledge to a local vineyard to sample Chile’s exporting firsthand.
Commerce can happen anywhere in Chile. Stop at a red light, and your window will be cleaned by an enterprising man with a bucket of soapy water. Park in a free public lot and you’ll still pay an entrepreneur to keep your car safe—sometimes from said entrepreneur. Candied peanuts and snacks are sold on the barriers at toll booths. Bags of fruit hang from makeshift frames along highways. Some roadside stands even have clay ovens in which to cook bananas. Elderly women waved white napkins at the speeding cars on the highway to alert them to the fresh bread for sale.
Roads are privatized and as you speed along, you constantly hear the chirping sound of your EZ pass being charged.
Our afternoon was spent at a local mall. Bill Gabbard, who represented several brands for Edwards Global Services, said food courts are a great place to do retail espionage by checking out how the competition operates. Doing research has its exciting moments, too. Gabbard says he’s been chased down the street by restaurateurs insulted or wanting to make amends after he buys a food item, takes a bite and throws the rest in the trash. “I have to watch my girlish figure,” he says in his defense.
After our field trip we returned to the hotel to freshen up for the reception at the U.S. Assistant Ambassador to Chile James “Buddy” Williams’ home. The grand, white-stucco house and lush grounds were like stepping back in time. White-coated servers circulated with trays of wine, Pisco Sours and tropical fruit juices. The dining room table was brimming with a variety of local dishes. The ambassador’s art collection, culled from his trips abroad, was on display around the house, as well as his library—which is always telling about a person.
Not speaking the same language adds a layer of complexity to finding a partner—business or otherwise. While most of the time interpreters are a godsend, sometimes there are problems.
Gabbard recounted the time he ran into a group of Japanese investors he had met with months earlier. “They said, ‘I’d have gone with you if your royalties weren’t 60 percent.’ I said, ‘What do you mean? They’re 6 percent,’” he says with enough emotion to prove the deal that almost got away is still a painful memory. This time, however, the deal did get done, a little over a year later.
To avoid any repeats, Gabbard sends his translators/interpreters all the information on his brands to read ahead of time. In Chile, I watched as his interpreter took notes she referred to on any facts and figures he quoted. And equally important, she was able to imitate Gabbard’s style of presentation so that the two of them worked in concert.
While the main business of a trade mission is the one-on-one meetings, it can be exhausting. Sales executives can have back-to-back meetings scheduled for an entire day.
Sometimes the prospect may not seem like someone you’ll ever do business with—like the young woman who represented her father, an engineer who was attending the U.S. Open tennis match in New York City. Or another young woman who owned a single pizza restaurant with her husband.
“But you never know,” Gabbard said. “Her husband could be a kingpin or she may be able to get partners.”
So instead of rushing her through the process, Gabbard took the time to talk to her about the concepts he was representing.
“This is a Forrest Gump mission,” Gabbard said. “It’s a box of chocolates. You don’t know what’s inside.”
Until the deals start getting signed.