Peru - Franchising Peru - Franchising
Growth in the Peruvian franchising sector can be attributed to the burgeoning middle class and its newfound purchasing power. Due to Peru’s reputation as one of the most gastronomically advanced countries in Latin America, food and beverage services continue to be the most represented among franchises in Peru. In addition, the Peruvian market remains a higly fragmented one—more than 90% of retail businesses are small family-owned enterprises—which leaves vast opportunities for U.S. franchises to expand to Peru. The average Peruvian consumer still views U.S. brands as “aspirational,” meaning that U.S. franchises espouse cultural values that Peruvians relate to. Because of the strength of U.S. brand affinity, there is ample potential for growth of U.S. franchises in Peru.
Although franchises in Peru are subject to general commercial law, general antitrust law, and Decisions 486, 608, and 291 of the Andean Community, there is no specific legislation governing franchising. According to Articles 162 through 164 of Decision 486, a written license agreement must be registered with the Peruvian Government’s Patents and Trademarks Office (INDECOPI). Prospective franchisers must be aware of a 30% income tax on royalties, 18% value added tax (IGV) (paid by the local company), and import tariffs dependent on the type of good. Countries that have signed double taxation agreements with Peru maintain separate regulations for royalties and income tax withholding (the U.S. not included).
The U.S. Commercial Service in Lima, in cooperation with the American Chamber of Commerce – AmCham, and Grupo Nexo Franquicia, founded a Franchise Committee in order to promote and market U.S. franchises in the country. This committee is composed of key investors in the franchise sector in Peru and works with prospective U.S. based franchisors interested in entering the Peruvian market.
In addition to food services, franchise sectors with strong growth potential include:
- Aesthetics, beauty and health (beauty salons, spas, salons, gyms, etc.)
- Clothing and accessories (clothing, footwear, jewelry, accessories, gifts, etc.)
- Specialized services (entertainment, leisure, playgrounds, etc.)
- Education (universities, colleges, etc.)