In search of the gold mine: Mexican business owners try their luck in ...

By Miguel Orta, translation by Andr?s Rodr?guez
L?elo en espa?ol

By mid October 2012, Mexican business owner, Alvaro Esparza, was forced to close his family business in downtown El Paso, Flautilocas, for economical and logistic reasons after three years since opening it. Esparza says that he opened his business in El Paso with hopes to gain a better income than with his restaurant in Ciudad Ju?rez, La Fondita, to support the education of his daughters. However the restaurant was not able to sustain itself.

Esparza realized that the administration of a business in the United States is completely different to the way in which a business is managed in Mexico. Besides, he says he took off without fixing matters of administration, sanitation or maintenance, since the inversion on the place had already been made.

?In El Paso they ask for authorization from the department of architecture, previously they have to authorize the hydraulic installation and the hygienic installation?which can only be done by authorized personnel,? Esparza says. ?In Ju?rez, the fire department doesn?t mess with restaurants or businesses unless there?s a problem, in El Paso the regulations are more preventative.?

Besides the regulations, the cost of operation of a business in the U.S. tends to be higher than that in Mexico. For Esparza, for example, the cost of publicity was excessive. ?What I failed at was the marketing system, I couldn?t advertise adequately, (because) publicity is very expensive,? Esparza says.

Many Mexican investors have bet on exporting their businesses to the U.S. border, looking to attract the Hispanic consumer already familiar with the product, as well as Anglos. Nevertheless, some have failed in their attempts to settle in the border. Businesses like Carousel, Mar?a Chuchena, Chamoyito?s and others, closed little after opening their doors. Others like Corralito, Garufa, el Bar 33 and Trevly have enjoyed success in El Paso.

?It is quite natural for businesses to cross national boundaries throughout the world.?As such, while businesses move from Mexico to El Paso, so do businesses move from the U.S. to Mexico,? says Oscar Varela, professor of finance and economics at the University of Texas at El Paso. ?The motives for such cross border investments includes the returns that businesses expect to earn in relation to the risk they take in crossing borders, the business environment that they will operate in, and diversification across countries and currencies.?

After years of working in the Mexican food industry, Adri?n Salinas ventured to innovate the U.S. fast food market and opened La Gorda, a Mexican-style restaurant located on East El Paso. Adorned in orange and yellow tones, with chile figures and porcelain onions hung at the corners, La Gorda is one of the Mexican businesses that has survived during the last decade in El Paso.

Even when the majority of the El Paso clientele is of Mexican origin, differences between Mexican and American consumers exist. ?(In El Paso) the clients are very faithful, but when you sell a bad product the client is very radical, if he doesn?t like a place, he goes and doesn?t return,? Salinas says. ?Having a restaurant is about hanging on, you can have a good product, you can last a long time, but you have to have (enough) money to survive at least a year?A lot of people who have come to establish restaurants in El Paso think that they bring the investment to open a business and they don?t prepare themselves with a ?cushion? to be able to support themselves.?

Salinas? business has had to surpass various crises to keep afloat, like the early 2012 fire in one his three locations due a short circuit.

Salinas attributes the failure of various businesses to the amount of fixed costs that a business in the U.S., and in El Paso in particular, calls for, such as property taxes or the high minimum wage in comparison to the average wages in Mexico. Minimum wage in the state of Texas is $290 for an employee working 40 hours a week, while in Mexico the same employee can be payed $60 a week for the same amount of work.

Security has also played an important factor for the growth of these businesses. ?We decided to move to El Paso first of all, for business reasons, while we were opening it became a matter of security,? says Luis Anzures, owner of the fast food restaurant Burritos Cris?stomo, about the move to the U.S. ?We bought the land, construction had been going on for a year, we were going slow, but during this the thing got ugly in Ju?rez and that?s when we said, let?s go.?

Mexican businesses in El Paso are beneficial for both the local and Mexican economy, Varela says. ?El Paso should be a beneficiary of this business migration. Particularly looking at it from the most important point of view, that is the consumer?s view, for businesses exist to serve the consumer,? Varela says.??There would be more choices and opportunities for consumers in El Paso as more businesses from Mexico are established here, and as a corollary to that, there would be more opportunities for employment and investment.?These would then have multiplier effects, as businesses that move here?its owners and employees from Mexico will also become consumers in El Paso.?

However, success in Mexico does not guarantee success in the U.S. side of the border, let alone in the restaurant industry. ?Being successful in business is not easy?there are many that do not survive the competitive environment that they operate in,? Varela says. ?Also, when a business moves to a new environment, indeed a new country, understanding the way of doing business in that country is also important.?

According to Dun & Bradstreet, a business counseling company, businesses with 20 or less employees have a 37 percent chance of surviving four years and only a 9 percent chance of surviving ten years. The restaurant industry competes with the highest index of failure, a 20 percent survival rate of two years. There are various reasons for the failure of such businesses, from the difference of pay in salary and taxes between countries, to errors of location.

While Esparza attributes the closing of Flautilocas to the lack of publicity, Anzures seems unfazed by the ghost of failure of fellow restaurant owners in the U.S. border, on the contrary, he sees the expansion of his business as an opportunity to change the model of U.S. consumerism. ?You want to come to the United States to be part of the system there, you have to adapt to the rules,? Anzures says. ?We decided to change the paradigm.?

Varela says that a business owner?s ability to maintain a business lies in his or her capacity to provide and develop a successful business plan, as well as in his or her ability to deal with all the nuances and complications of the operation.

Anzures sums up the success of his business in three factors, which are to ?(offer) a good product, a good service and a good location; asides from a good attitude.?

Esparza discards that the cause of failure of various Mexican businesses in El Paso is their origin. ?I don?t believe that coming from another place to the United States predisposes you for a triumph or a failure, we simply don?t know the rules well and we learn by trial and error,? Esparza says.

Source: http://www.mineromagazine.com/?p=491

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