This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/7/2017
Overview

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 - especially during this period of stagnation - 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, from Brazilian franchisors offering a variety of product and service solutions, more than what they might encounter in other Latin American markets.
 
In 2014, the Brazilian franchise sector grew by 7.7 percent, and total sector revenue was about R$ 127.331 billion (US$ 49 billion). There are an estimated 2,942 franchising chains (a growth of 8.8% compared to 2013) and 125,641 franchising units in the country (a growth of 9.8% comparing to 2013), 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 1,096,859 jobs, a growth of 6.5% over last year, during a period in which the Brazilian unemployment rate was 6.8%. In the last year alone, 239 franchisors reportedly entered the market.
 
According to the World Franchise Council (WFC), Brazil ranks fourth in number of brands offered through the franchising model, behind China (4,000), USA (3,828) and South Korea (3,691). Rounding out the top 10 countries are India, France, Philippines, Mexico, Japan and Turkey.
 
As for total number of franchising units operating, the top 10 countries are: USA (769,683), China (330,000), Japan (252,514); South Korea (203,349), Philippines (130,000), and Brazil (125,641); followed by India, Australia, Canada, and Mexico.
 
The Brazilian Franchise Association (ABF) projects sector growth for 2015 as follows:
  • Sector Venue: 9%
  • Units: 10%
  • Brands: 8%
The franchise sector revenue is composed of:
  • Services / Retailer (accounts for 21%)
  • Food (20.1%)
  • Sport, Health, Beauty and Leisure Products & Services (18.3%)
  • Clothing (7.6%)
  • Hotel / Hospitality Industry (7.3%)
  • Shoes / Accessories (6.9%)
  • Education / Training (6.7%)
  • Home / Construction (5.7%)
  • Automotive (3.5%)
  • Informatics / Electronics (1.8%); and
  • Cleaning (0.9%).
In terms of growth rankings, The top 11 best-performing franchise sectors in Brazil in 2014 were (ranked by % of growth):
  • Informatics / Electronics (+ 27%)
  • Shoes / Accessories (+19%)
  • Home / Construction (+17%)
  • Education / Training (+12%)
  • Automotive (+9%)
  • Cleaning (+8%)
  • Food (+7%)
  • Services / Retailer (+6%)
  • Sport, Health, Beauty and Leisure Products & Services (+5%)
  • Clothing (+3%); and
  • Hotel / Hospitality Industry (+0.3%).
Local Brazilian franchises dominate the market across many sectors, controlling 93% of sales volume; while foreign groups, mostly from the U.S., are making headway. According to ABF, 138 foreign franchise brand concepts currently operate in Brazil, of which 54 are based in the U.S.
 
The presence of franchise units is distributed throughout Brazil as follows, grouped by state areas:
  • Southeast 70.9%
  • Southern 16.8%
  • Northeast 7.6%
  • Middle-West 3.9%; and
  • Northern 0.8%.
There are franchising operations in 2,108 cities countrywide, or 37.8% of Brazilian cities.
 
Top Players Ranked by Revenue, Number of Units
The ranking of the top twenty 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.

 
#BrandSector
1O BoticarioBeauty
2Wizard IdiomasEducation
3Colchoes OrtobomHome
4Cacau ShowFood
5SubwayFood
6McDonald'sFood
7AM PM Mini MarketServices/Retailer
8KumonEducation
9Jet OilAutomotive
10Bob'sFood
11BR ManiaServices/Retailer
12Nosso BarFood
13CorrelosServices/Retailer
14Escolas FiskEducation
15CVC BrazilTravel and Tourism
16Dia %Retailer
17Oticas DinizAccessories
18Oticas CarolAccessories
19CCAAEducation
20Hering StoreClothing
Finding suitable master franchisees in Brazil is a very challenging job for US franchisor 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 the 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 foreign 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 the 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. Also, 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, 106 Brazilian brands are present in 53 countries in all continents. 31 operate in the USA, 22 in Paraguay, 20 in Portugal, 13 in Argentina, 13 in Bolivia, 11 in Spain, 11 in Mexico and 10 in Colombia, among other countries.

Web Resources

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 Trade Development and Promotion