Mongolia - FranchisingMongolia - Franchising

Overview
U.S. franchises are penetrating Mongolia, including Burger King, Cinnabon, Coffee Bean and Tea Leaf, Hard Rock Café, KFC, Pizza Hut, and Round Table Pizza.  Of Mongolia’s three million people, over 60 percent live in Mongolia’s three major urban areas.  Ulaanbaatar, Mongolia’s key market and economic engine, has 1.3 million people — nearly half of the country’s total.  With such a concentrated populace, investors do not need a far-flung network to tap the Ulaanbaatar market.

U.S. products and services for franchises generally find Mongolia an excellent fit.  A youthful country, over 81 percent of Mongolia's three million people are under 40, and approximately 76 percent are under 35 years of age.  Flexible, open to new products, services, and ideas, this young population likes American brands.  Most Mongolians, particularly urban residents, have smart phones, radios, and TVs.  Newspapers are cheap; billboards abound.

Mongolians also have increasing disposable incomes.  Although the government places the minimum monthly wage at 240,000 Tugriks or about $100, official figures do not capture actual economic capacity.  When adjusted by purchasing power parity (PPP), Mongolia’s GDP per capita was last recorded at $11,477 in 2015.  In addition to formal jobs, many Mongolians earn hundreds of dollars a month through gray market activities, and foreign remittances bring in hundreds if not thousands of dollars for Mongolian families.  A best guess puts the effective number willing and able to pay on a regular basis for higher cost American goods and services, particularly through franchises, somewhere between 600-800 thousand people.
 

Data Sources:
Total Local Production:  National Statistics Office of Mongolia
Total Exports:  Bank of Mongolia
Total Imports:  Bank of Mongolia
Imports from U.S.:  U.S. Census Bureau

Leading Sub-Sectors and Opportunities
The ongoing success of the first franchises in Mongolia, predominately in the food and beverage sector, shows that Mongolians will buy American franchise products, even with the availability of cheaper, albeit of demonstratively lower quality, products from competitors.  Where price differentials are reasonable and the qualitative difference between the products clear, U.S. franchisors and their franchisees in the food and beverage sector are succeeding.
Success Factors to Consider.

Major international franchise firms have established the following best practices for doing business in Mongolia:

1. Register the brand in Mongolia before entering the market.

2. Find reliable local partners who can help navigate the local business environment.

3. Understand cultural differences and adjust market access strategies accordingly.

4. Be able and willing to localize your product if necessary, without changing the core product.

Web Resources
Mongolian Resources
American Chamber of Commerce in Mongolia
Business Council of Mongolia
Embassy of Mongolia, Washington, DC
General Agency for Intellectual Property and State Registration
General Agency for Specialized Inspection    
General Authority for Social Insurance
General Tax Authority of Mongolia
Government of Mongolia    
Mongolian Builders Association   
Mongolian National Chamber of Commerce and Industry   
National Statistics Office of Mongolia

U. S. Resources
U.S. Embassy in Mongolia Commercial Specialists:  Ulaanbaatar-Econ-Comm@state.gov
U.S. Embassy, Ulaanbaatar
U.S. Department of Commerce
U.S. Department of Commerce Advocacy Center
U.S. International Trade Administration
U.S. Trade and Development Agency
U.S. Export-Import Bank
U.S. Overseas Private Investment Corporation
U.S. Department of State