Brazilian Franchise Sector Exceeds Expectations

by Ed Teixeira

Translated by Bernard Jeger

A recent report on the state of franchising in Brazil provided by Mercado & Consumo includes a number of key statistics and indicates that the franchise industry in Brazil is dynamic.

The franchise sector grew 16.9% in 2011, reaching a turnover of 52 billion dollars. According to Ricardo Camargo, executive director of the Brazilian Franchising Association (ABF), the number presented by the institution this morning is higher than expected. "We were expecting an increase of 15%. It is a very strong growth, but we are sure that we still have much room to grow," he said at a news conference.

According to a survey of the ABF, the number of brands grew 9.5% compared to 2010. Currently there are 2,031 companies offering franchises in the market. For Camargo, the increase in micro-franchises propelled this movement. The number of retail stores had a lower growth year. In 2011, the number of units increased 7.8%, while in 2010 the growth was 8%. The micro-franchise - networks with an initial investment of up to 30 thousand dollars - represent 17% of the total marks and 3.7 billion dollars, equivalent to 4% of the total turnover of the franchising industry, reaching 336 units versus 213 in 2010.

For Camargo, the increase in the value of key-money or rent invalidates new businesses. The association blames the real estate market. "Franchise just does not grow more, because there is a difficulty of finding commercial locations. There was an excessive real estate appreciation," he explains.

The hotel industry and tourism sector had record growth with an 85.8% boost in sales. Next sector is furniture, decoration and gifts (35%); sports, health, beauty and leisure (24.3%), and business services (14.9%) and food (14.5%). The sector that was less favored in the past year was photography and graphics, which grew only 5.9%.

As for the distribution of the units, the Southeast continues to harbor the largest number of stores, with 57.6%. The highlight is the Northeast that has 15.6% of franchises opened in the country, against 14.1% of the South. The state of São Paulo continues ahead with 51.1% headquarters of franchising networks, followed by the states of Rio de Janeiro (12.7%), Paraná (8.2%) and Minas Gerais (5.8%). Excluded from the data are product format franchises for example, gas stations and soft drink companies.

© 2011 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com