Discusses opportunities for U.S. franchisers and legal requirements in the market.
Last Published: 6/29/2017

Brazil is the fourth largest market in the world (in the number of franchise chains). There are only 69 American brands operating in country, therefore, this represents a huge opportunity for U.S. concepts expanding their presence internationally.
The main challenge in Brazil is to identify a potential investor as a master franchisor, one who has the ability and desire to scale the franchise quickly. Local investors are normally interested in opening only one or two locations.

The Brazilian franchise sector is among the world’s largest and most sophisticated markets, in terms of business practices and in adapting concepts from both foreign and domestic franchisors. The sector has consistently grown faster than Brazil’s economy overall and has become one of the economy’s main growth engines. In addition, even traditional retail companies are adding franchising to their channel expansion strategy. U.S. franchisors encounter strong competition in this robust market, with Brazilian franchisors offering a variety of product and service solutions, more so than what they might encounter in other Latin American markets.  

In 2016, the Brazilian franchise sector grew by 8.3 percent and total sector revenue was about US$50 billion, (R$155 billion). There are 3,039 franchising chains (a decrease of 1.1 percent compared to 2015) and 142,600 franchising units in the country (a growth of 3.1 percent compared to 2015), making Brazil the sixth largest in the world, in number of units and the fourth largest in number of franchise chains. The franchise sector currently accounts for about 1.2 million jobs, a growth of 0.2 percent over last year, (projection to grow 3 percent in 2017) during a period in which the Brazilian unemployment rate was 11.5 percent.

The Brazilian Franchise Association (ABF) projects sector growth for 2016 as follows:
Sector Venue  - 9%
Units                - 5%
Brands            - 1%
 
According to the World Franchise Council (WFC), Brazil ranks fourth in number of brands offered (3,039) through the franchising model, behind China (4,500), South Korea (4,288), and USA (3,828). Rounding out the top ten countries are Turkey, France, India, Mexico, Philippines and Japan.
 
As for total number of franchising units operating, the top ten countries are:
USA              (795,932)
China            (330,000)
Japan           (260,992)
South Korea    (194,199)
Philippines     (150,000)
Brazil           (142,600);
followed by Germany, India, Mexico and Australia.
 
The franchise sector revenue is composed of:

  • Food (26.7%)

  • Health & Beauty (17.7%)

  • Services & Other business (13.9%)

  • Fashion (+ shoes & accessories) (13.5%)

  • Education Service (6.9%)

  • Hotel & Tourism (6.6%)

  • Home / Construction (5.6%)

  • Automotive Service (3.6%)

  • Informatics / Electronics (3.1%)

  • Entertainment / Recreation (1.4%)

  • Cleaning (0.8%) 

    In terms of growth, rankings, the top 11 best-performing franchise sectors in Brazil in 2015 were (ranked by percentage of growth):

  • Health & Beauty (15.5%)

  • Automotive Service (11.6%)

  • Fashion (+ shoes & accessories) (10.4%)

  • Food (8.8%)

  • Cleaning (7.9%)

  • Informatics / Electronics (7.5%)

  • Home / Construction (5.4%)

  • Education Service (5.2%)

  • Services & Other business (4.3%)

  • Hotel & Tourism (3.2%)

  • Entertainment / Recreation (-10.7%) 

    Local Brazilian franchises dominate the market across many sectors, controlling 94.8 percent of sales volume; while foreign groups, mostly from the U.S. - comprising 5.2 percent, are making headway. According to ABF, 161 foreign franchise brand concepts currently operate in Brazil, of which 69 are based in the United States.
     

Foreign Franchises Brands in Brazil

Foreign Franchises Brands in Brazil

%

USA

42.9%

Portugal

 9.9%

Argentina

 8.7%

Spain

 7.5%

U.K.

 5.6%

France

 5.0%

Italy

 4.3%

Germany

 2.5%

Australia

 2.5%

Canada

 2.5%

Others

 8.6%

 

161 International Franchises Brands in Brazil

161 International Brands in Brazil

%

Food

29%

Fashion (+ shoes & accessories)

19%

Health & Beauty

13%

Education Service

10%

Cleaning

 6%

Services & Other business

 6%

Entertainment / Recreation

 5%

Automotive Service

 4%

Home / Construction

 4%

Hotel / Tourism

 3%

Informatics / Electronics

 1%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



















There are franchise operations in 2,321 out 5,570 cities or 42 percent of Brazilian cities.
 
The presence of franchise units is distributed throughout Brazil as follows, grouped by areas:
Southeast      70.9%
Southern        17.3%
Northeast       7.5%
Middle West    3.7%
Northern         0.7%  
 

Distribution by units by the ten largest Brazilian cities

Distribution by units by the ten largest Brazilian cities:

REGION

STATE

CITY

% 2015

%2016

Southeast

Sao Paulo

SAO PAULO

15.5%

13.0%

Southeast

Rio de Janeiro

RIO DE JANEIRO

 6.9%

 6.6%

Middle West

Distrito Federal

BRASILIA

 2.5%

 2.4%

Southeast

Minas Gerais

BELO HORIZONTE

 2.5%

 2.3%

Southern

Parana

CURITIBA

 2.2%

 2.0%

Northeast

Bahia

SALVADOR

 2.1%

 1.9%

Southeast

Sao Paulo

CAMPINAS

 1.6%

 1.6%

Southern

Rio Grande do Sul

PORTO ALEGRE

 1.8%

 1.6%

Northeast

Ceara

FORTALEZA

 1.6%

 1.5%

Northeast

Pernambuco

RECIFE

 1.7%

 1.4%

 
The ranking of the top 20 franchise operations in Brazil shows the dominance of Brazilian franchisors over foreign competitors. Only four out of the top 20 performing franchise brands (in terms of earnings revenue and number of units in operation) are foreign: Subway, McDonald’s and AM-PM Mini Market from the US; and Kumon from Japan.
 

Top 20 franchise operations in Brazil

Top 20 franchise operations in Brazil

#

BRAND

SECTOR

UNITIES

1

O Boticário

Health & Beauty

3,730

2

Subway

Food

2,153

3

Cacau Show

Food

2,045

4

AM PM Mini Market

Food

2,039

5

Colchões Ortobom

Home / Construction

2,011

6

McDonald’s

Food

1,916

7

Jet Oil

Automotive Service

1,516

8

Lubrax +

Automotive Service

1,475

9

Kumon

Education Service

1,375

10

BR Mania

Food

1,255

11

Wizard Idiomas

Education Service

1,230

12

CVC Brasil

Hotel / Tourism

1,097

13

Bob’s

Food

1,056

14

Farmácias FTB

Health & Beauty

  985

15

Óticas Diniz

Health & Beauty

  980

16

Nosso Bar

Food

  955

17

Correios

Services & Other business

  944

18

Óticas Carol

Health & Beauty

  940

19

Dia%

Food

  833

20

Fisk Centro de Ensino

Education Service

  801

 
Finding suitable master franchisees in Brazil is very challenging for U.S. franchise companies. One strategy is to develop relationships with Brazilian franchisors and master franchisees of non-competing, yet complementary concepts. In general, Brazilian investors make decisions based on well-structured business plans and expectations of financial return. It is misleading to think that emotional factors will heavily influence a decision in favor of a certain brand or business concept. It is important that U.S. franchisors understand this, and approach the market only after having done the necessary homework, having estimated the true potential of the brand for Brazil.
 
It is also increasingly common for a Brazilian investor to negotiate risk-sharing agreements with a foreign franchisor when introducing a new brand to the market. “Risk” in this case refers to making actual direct investment in the form of a joint-venture partnership. In addition, as many Brazilian concepts are now seeking to expand internationally, some will be open to discussing bilateral agreements, wherein a foreign brand is launched in Brazil at the same time as the foreign franchisor develops a Brazilian brand in its home country.
 
According to ABF, 134 Brazilian brands are present in 60 countries in all continents: 37 operate in the USA, 25 in Paraguay, 21 in Portugal, 16 in Argentina, 13 in Mexico, 12 in Bolivia, 12 in Colombia and 11 in Spain, among other countries.
 
Resources:

 
More information, please contact Renato Sabaine at renato.sabaine@trade.gov  

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Brazil Franchising Business Management