A Revolution in Fast Food on the Avenida Revolucion

Avenida Revolucion, the heart of Tijuana’s bustling tourism district, could begin to take on a decidedly American look during coming months as Jack in the Box and several other U.S. fast-food operations open new U.S.-style restaurants.

Jack in the Box, which is owned by San Diego-based Foodmaker Corp., has licensed a Mexican corporation to open a two-story restaurant today next door to the long-standing Woolworth’s store on Revolucion.

Other U.S.-based fast-food giants interested in entering the Tijuana market--possibly on Revolucion--during 1992 include McDonald’s, Carl’s Junior and Ohio-based Wendys. Ann Arbor, Mich.-based Domino’s Pizza in September opened a pizza-delivery shop in Tijuana’s River Zone.

The rush of U.S.-based fast-food operators to Tijuana and the rest of Mexico is fueled largely by the inevitable saturation of the domestic market.

Fast-food profit margins are being squeezed because most of the nation’s better restaurant locations already have been taken. The industry has responded with a wave of franchise agreements in foreign countries, where there is more room for growth, said Michael G. Mueller, a San Francisco-based restaurant industry analyst with Montgomery Securities industry observers.

“Overseas is already the main area of growth for McDonald’s . . . and McDonald’s is very keen on Mexico,” Mueller said.

The “explosion” of U.S.-based fast-food restaurants in Mexico was prompted largely by the elimination of Mexican regulations that had stymied U.S. attempts to enter the country, said Steve Kishi, vice president of international operations Mexican for Anaheim-based Carl Karcher Enterprises, the parent company of the Carl’s Junior restaurant chain.

“There was basically an overall government attitude that halted expansion,” Kishi said. “But the laws have all changed . . . and you’re going to see an explosion of growth because this is virgin country. It’s almost like this is a whole territory that had been closed and now it’s open.”

Mexican leaders relaxed regulations that made it difficult for U.S.-based fast-food companies to realize a profit on franchise operations in the country, said Michael Fulkerson, Jack in the Box’s vice president of international franchise operations. Mexican officials also relaxed “local content” laws that, in essence, prohibited U.S. companies from importing goods used in food preparation, Fulkerson said.

“It’s a very exciting time,” said Fernando Orvananos, a partner in the Mexican corporation that has been licensed by Foodmaker to open restaurants in Mexico. “We’ll open our first store in Tijuana, and another four are coming,” Orvananos said. “We hope to open two next year . . . one in Mexicali and a second in Tijuana.”

Jack in the Box’s initial Tijuana restaurant is “a special location” because, in addition to sating the vast local appetite for U.S.-based fast food products, it will cater to the millions of tourists who visit the city each year. “We expect something like a 50-50 split” between U.S. tourists and Mexican nationals, Orvananos said.

Jack in the Box’s other Mexican operations will cater almost solely to the local market, Orvananos said.

Jack in the Box expanded across the border into Tijuana rather than through Mexico City or another large city in order to “speed up our learning curve,” Fulkerson said. “We’re just 25 miles down the road from our franchisee . . . so we’re going to be able to help him very easily.”

Jack in the Box and other U.S.-based chains believe that their products will be accepted almost immediately in Mexico because a continuous flow of people between the countries has broadened interest in American foods.

“Fortunately, for Jack in the Box, we have such a strong market presence in Southern California that Mexicans and Mexican-Americans who travel back and forth already know our name,” Fulkerson said.

Media attention on the fast-food industry’s foreign expansion has focused largely upon Russia and Eastern Europe, where U.S. fast-food operators are now building a presence. But “Mexico is . . . a very strategic market for almost every American franchise operation right now,” Kishi said.

“I would imagine that most of the U.S. fast-food restaurants will be looking at Tijuana soon,” Fulkerson said. “Fortunately, we feel that we’re leading the way in Tijuana.”

Spokesmen for McDonald’s did not return telephone calls about the company’s franchising plans in Tijuana. However, industry sources said that a McDonald’s probably will open in early January, possibly on the Revolucion.

“We’ve been in Mexico only a short period of time, but it’s now time to really accelerate development in that country,” Gordon said.

Carl’s Junior opened its first franchised location in Mexico--in Monterrey, south of Texas--in April. A second Monterrey location will open in January, and a restaurant is also planned for Guadalajara, in Central Mexico.

Tijuana is “definitely a market to be expanded into” by Carl’s Junior, Kishi said.

Domino’s, which entered Mexico through a master licensing agreement in late 1989, now has 39 locations in the country, including one on the Paseo de los Heroes in Tijuana’s River Zone that opened in early September. “Mexico is by far the fastest growing market for us as far as store count and sales,” said Domino’s spokeswoman Vickie Monaghan. “The only foreign country that does better for us is Japan.”

Domino’s, which offers pickup and delivery services only, intends to build about three locations in Tijuana. All will be constructed through a Mexico City group that holds the master franchise for Mexico, Monaghan said.