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All Eyes on the Big Enchilada

Q: When did you decide to expand into the U.S. and how is business different on this side of the border?

A: The first U.S. restaurant we opened was in Laredo, Tex., in September, 1994. One of my uncles was living in Laredo and working in another restaurant there, so he had experience doing business in the U.S. An opportunity came up when another Mexican place closed down. The location had a bad reputation, and my uncle saw that he could buy the place very cheaply. So, we bought it, remodeled, and proved them wrong!

Our second U.S. restaurant opened in December, 1996, in El Paso, because we had a lot of Americans come to our location in Juarez -- it is very close to the border crossing, on a main road. They loved our food and kept asking us to open on the other side.

The big difference between the U.S. and Mexican systems is the payroll. In Mexico, employees work a particular shift, and they get paid by the week, so you have to hire more people to cover all the shifts. The U.S. workers work by the hour, so there is a different level of productivity, and you can schedule them according to your busy times and operate with fewer employees overall.

The other things are insurance needs, infrastructure, and regulations that exist in the U.S. but not in Mexico. The health inspections are more stringent in the U.S., and so we implemented a lot of policies for our U.S. restaurants that we also use voluntarily in our Mexican restaurants.

But the big challenge was that in the U.S., we were seen as a startup business, so we couldn't get credit or financing even though we had been operating successful restaurants in Mexico for many years. Opening in the U.S. was like starting all over again, so all of the working capital had to come from the partners. Of course, after the first few restaurants did well, we established some credibility and started being approached by bankers and investors.

Q: Your next challenge is getting the U.S. franchise established. How is that going?

A: We started the project two years ago, again with investments from the partners, and we've been taking it slowly so we can get all the systems in place and make them work. We hired a consultant to help us reach a new level of professionalism, but keep the feel and flavor of a mom-and-pop operation. The strategy is to start growing the franchise around our base in places like San Antonio, Dallas, Albuquerque, Phoenix, and Tucson, and then branch out to other U.S. cities that have large Hispanic populations, like Chicago.

We currently have 11 stores in the U.S. and Mexico. Ten are company-owned and one is owned by our first franchisee. We're trying to get 20 to 25 franchisees committed. So far, the concept is selling really well. We started offering franchises in April, 2003, and by December, we had 16 stores sold without doing a lot of marketing. The people who are buying in are people who know the concept, like it, and want to invest in it.

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