Cultural Differences BRAZIL: The New Home of Franchising

As the eyes of the world turn unanimously to the bright yellow and green glow of Brazil this summer, The Franchise Magazine looks at why this exploding economy is a veritable goldmine of franchise activity.

While franchising has been established as an extremely profitable and often more secure way of becoming one’s own boss, one country in particular has shown a remarkable taste for the system. In 2012, the BBC reported upon Brazil’s continuing franchise boom and what was fuelling it. The article found that between 2002 and 2010, the number of young Brazilians aged between 18 and 24 who took a chance at becoming ‘entrepreneurial’ rose by a staggering 74 per cent. Now, as the greatest show on earth – The Fifa World Cup – comes to the country, Brazil’s existing franchises are gearing up to showcase their offerings to engage even more people as business partners.

Statistics show that since the BBC brought franchising in Brazil to attention of the UK mainstream, Brazilian franchises have continued to thrive and even more businesses have emerged onto the market. The Brazilian Franchise Association (ABF) posted that overall in 2013, the industry saw an 11.4 per cent increase in revenues from the year before. In particular, Cleaning and Maintenance franchises registered an increase in overall revenue of almost 15 billion US Dollars. It (almost) goes without saying, franchising in Brazil is huge business.

According to Flávia Amaral of Franchiseek.com, Franchises, such as Natorilha quick service nacho and tortilla business, have grown enormously because of three effecting factors. “A lack of resources available to the businessperson who wants to expand his/her business, the gradual decrease of job offers, which stimulated people to start their own business and the creativity and entrepreneurial profile of Brazilians (have enabled franchising to flourish),” writes Flavia.

One area of opportunity in particular has been seized upon by Brazilian franchise brands in response to widespread consumer demand – the evolution of shopping malls in the South American nation has enabled many franchise brands to become even more prevalent. Executive Director of ABF, Ricardo Camargo states: “We have noticed a large increase in the number of malls in the medium and small cities, since people do not want to go to the big cities to go shopping.

This is also due in part to the growth of the purchasing power of Brazil’s interior population. The main retail segments we see in shopping malls are food, clothing and beauty.” As North American culture seeps across the world to countries like Brazil, franchise brands, both native and imported, are likely to find more opportunities to expand.

As the world turns its eyes to the nation which US business magazine Forbes ranks as the fifth most prolific franchising country globally, it is likely to be a golden summer for Brazilian franchise brands.

Getting it Right in Brazil

The beautiful beaches of the Copacabana and streets of Rio are no strangers to tourists, but as this year’s FIFA World Cup kicks-off in June, followed closely by the 2016 Olympic games, South America’s biggest country, Brazil, is surely one of the most in-demand destinations on the planet.

So what’s important to know for anyone looking to invest in business in Brazil?

Look at that economy

Brazil is one the largest developing countries in the world, with an average annual GDP growth rate of over five per cent, and according to Goldman Sachs, by 2025 Brazil will overtake the United Kingdom and France as the world’s fifth largest economy.

Money to spend

With the world’s eyes soon to be gazing upon Brazil, the government has invested heavily, over £500 million, into improving the roads, airports and other transport links, all of which are vital for foreign business to succeed. However, more importantly this has lead to income wages rising in Brazil, meaning that the Brazilian people have a lot more spare cash and are willing to spend.

Consume, consume and consume some more

A population of over 186 million people, which includes over one million multi-millionaires and a rapidly growing middle class – around 95 million people – who have access to finance, has created an appealing consumer market.

Encouraged foreign investment

The Brazilian government has no restrictions imposed for buying land and property. This means that once you buy the land or property it is 100 per cent secure.

Peaceful country

The nation, unlike many South American countries, has experienced decades of democratic government and is seen to have no political tensions. This all aids a franchisors ambition of expanding into Brazil with the security of knowing that if a new party is elected, their business and the protection of that business are safe.