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THE SWEET SMELL OF SUCCESS

Among thriving Latin American retailers, one name is likely to make the mouth water: ChurroManía, a chain of shops selling hot chocolate and churros, a sweet, fried dough of Spanish origin.

The Venezuelan chain was born in 1997 when Ariel Acosta Rubio (creator and owner of ChurroManía) bought a 180-square-foot (17-square-meter) space in a shopping center in the coastal Venezuelan town of Puerto de la Cruz. As he pondered retail options, a cousin suggested opening a churrería, a type of business that was fast disappearing in Venezuela as elsewhere in Latin America. Many of the region’s churrerías had been opened by Spaniards who had moved to the Americas during the Spanish civil war of the 1930s.

Acosta liked the idea and set to work trying out different recipes. He sold his stake in a long-distance phone services business to concentrate on the new chain.

“I wanted to revolutionize the sector of specialty foods starting from ground zero,” Acosta said. “My former business partner thought I was nuts, given the growth of the telecommunication sector.”

When he started getting inquiries from other countries, he decided to go the way of the franchise, an approach he calls “most kind to successful businesses.”

By 1999 there were 17 ChurroManía units, and that shot up to 56 within five years. Besides operating in several Latin American countries, the chain operates in Spain and The Canary Islands. There are now about 60 units, of which 45 are in Venezuela. On the agenda for this year is the opening of 15 units throughout Latin America.

Other Latin American entrepreneurs talk about stumbling blocks such as government protectionism and tariffs, but Acosta says the main barrier he has faced is cultural. “We look like we are very similar but we are not,” said Acosta. “We have had to adapt and evolve with the culture of each country.”

The biggest challenge was the U.S. market, where there are now seven ChurroManía stores, all in Florida — in Clearwater, Miami, Orlando and Pembroke Lakes. Obtaining an operating permit in the U.S. takes six months, five more than in Venezuela or any Central American country, Acosta says.

“The most difficult experience was to set up business there and understand how the system works,” he said. “But if you manage to run a business in the United States for at least three years, it means you have a solid and respected business. We have been there now six years.”

Acosta chose the U.S. for the first overseas incursion because he wanted to use his “youth and energy” to penetrate the most difficult market of all and acquire know-how.

Since churros belong in the impulse-buying category, it was a must to be in a shopping center. But that was easier said than done, says Acosta, as he found out when he went scouting for his first locale in Miami. He learned that a churrería has to be located in a busy hallway, not in the food court.

“Shopping centers didn’t want us and didn’t believe in our concept,” Acosta said. “They couldn’t understand why our product can be more appealing than the pretzels.”

They finally set up shop in Miami’s Dolphin Mall in 2001, though even there he was received with caution. The mall asked for a $100,000 letter of credit to cover the risk of taking on an unknown food tenant, Acosta recalls. That leasing contract expires next year, and Acosta says he is negotiating to cancel the letter of credit.

“We have proved ChurroManía is successful and that its menu appeals to all types of consumers, not just Latinos,” he said.

The chain has done well in most countries, but Acosta has learned an important lesson: think globally, act locally. He had to make an exception to his rule against alcoholic beverages for the franchisee in Madrid, allowing the sale of beer, an indispensable item among that country’s consumers. Moreover, Spaniards eat churros only during the winter, so the chain sells other snacks the rest of the year.

In Brazil the franchisees sell only stuffed churros, and those are shorter than the traditional churro. In Honduras churros stuffed with black beans are a favorite dish while in Chile, known for its dulce de leche (milk candy or milk jam), the franchisee must use local product for its stuffed dulce de leche churros, which are among the most popular ChurroManía offerings.

ChurroManía had to close two units in Tenerife, Spain, after consumers there got bored with the concept. Similarly, the franchisee in Puerto Rico closed its two stores a year ago as sales fell while the rents remained high. There is hope for Puerto Rican churro fans, though: Acosta says ChurroManía plans to reopen with a smaller store format there.

— MBP