What is in this article?:
- Restaurants look further for international growth opportunities
- Best practices for international growth
Moving beyond the BRIC countries, restaurants will need to invest in marketing, menu and human capital when expanding into new territories
As more restaurant brands look for international expansion opportunities, a handful of new geographical regions outside the usual suspects of China and India are appearing on the radar.
U.S. brands are already well-established in the BRIC region — Brazil, Russia, India and China — and the next frontier has become the countries of MIST — Mexico, Indonesia, South Korea and .
The emerging block offers restaurants younger populations, increasing incomes and stable Gross National Products, according to James Deyo III, a director with Mexico-based Alsea, which is developing brands including Chili’s Grill & Bar, P.F. Chang’s China Bistro, Pei Wei Asian Market, California Pizza Kitchen and Italianni’s in six nations. Deyo said the MIST term was coined earlier this year by Goldman Sachs executives for “the new emerging block for the new emerging market.”
Deyo was among panelists at the People Report-Black Box Intelligence 2nd Annual International Symposium in Richardson, Texas, which took place earlier this month as part of the Best Practices Conference.
“Largely in the MIST countries you have better infrastructure, you’ve got better access to capital, you’re got better access to building permits,” Deyo said. “Overall, it’s a more stable environment to be doing business.”
Looking at Mexico in particular, Deyo said that nation offers many advantages for U.S. brands, including proximity.
He said Mexico currently has a $5 billion foodservice industry that is expected to grow about 30 percent, to nearly $7 billion, by 2016. Chain restaurants represent between 14 percent and 15 percent of the market, he said. Mexico, the world’s fifth largest country, has also seen inflation stabilize over the past three years and its gross domestic product has grown around 4 percent annually after it slowed in the recessionary years of 2008 and 2009.
“It has a stable macro-economic environment,” Deyo said. “Overall the indicators are fairly stable. Skilled labor is at a low cost. I will say one downside to the labor in Mexico is that it is all unionized, so it’s a little bit challenging. We’re just entering into how do you pay people on an hourly or part-time basis, because contracts are only for full-time employment.”
U.S. brands have strength south of the border as well, he added.
“In Mexico, if you have got a brand that is aspirational, people are going to gravitate toward that brand,” Deyo said.
Of U.S. casual-dining brands’ unit counts in Mexico, Chili’s is No. 1 and Applebee’s No. 2, he said. Alsea’s Italianni’s is No. 4. Casual dining is projected to grow 10 percent, and family dining is projected to grow more than 20 percent over the next few years, he added.
Fast-casual restaurant brands have yet to catch on strongly in Mexico, Deyo explained.
“The problem is that people in Mexico don’t get fast-casual,” Deyo said. “It was the same thing for us. We didn’t get it when it first started. But fast-casual is changing, and people are starting to learn that it is quite efficient to do this. But there is not a lot of competition.”