Brazil - Country Commercial Guide
Franchising

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2021-01-21

Brazil is the fifth-largest market in the world in terms of number of franchise chains. Currently, there are only 81 American brands operating in-country, and this represents a huge opportunity for U.S. concepts seeking to expand their presence internationally.

The main challenge in Brazil is to identify a potential investor as a master franchisee who has the ability and desire to scale the franchise quickly. Local investors are often interested in opening only one or two stores /restaurants in the first year.

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 the recent period of recession and stagnation - to 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 so than what they might encounter in other Latin American markets. Brazil has specific legislation that covers franchising.

In 2019, the Brazilian franchise sector grew by 6.8%, and total sector revenue was about US$ 46.3 billion, (R$ 186.7 billion). There are 2,918 franchising chains (an increase of 1.4% compared to 2018) and 160,958 franchising units in the country (a growth of 4.7% compared to 2018), making Brazil the sixth-largest in the world in number of units and the fifth-largest in number of franchise chains. The franchise sector currently accounts for about 1.35 million jobs, a growth of 4.6% over last year, (with a projection to grow 6% by the end of 2020) during a period in which the Brazilian unemployment rate was + 12.7%.

Before the COVID-19 pandemic, the Brazilian Franchise Association (ABF) projected sector growth for 2020 as follows:

  • Sector Venue 8%
  • Units 6%
  • Brands 1%

These numbers will certainly not be reached, however, the franchise sector is very resilient, and as of this writing it is too early to speculate how the sector will perform post-COVID.

According to the World Franchise Council (WFC), Brazil ranks fifth in number of brands offered (2,845) through the franchising model, behind South Korea (4,844), India (3,922), USA (3,472), and Taiwan (3,395). Rounding out the top 10 countries are France, Turkey, Philippines, Japan, and Russia.

As for total number of franchising units operating in Brazil, the top 10 countries are:

  • U.S. (732,842)
  • Japan (260,992)
  • South Korea (200,000)
  • India (168,000)
  • Taiwan (148,941)
  • Brazil (146,134);
  • followed by Philippines, Australia, Poland and France.

The franchise sector revenue in Brazil is composed of:

  • Food (26.2%)
  • Health & Beauty (18.4%)
  • Services & Other business (14.5%)
  • Fashion (+ shoes & accessories) (12.9%)
  • Hotel & Tourism (7.2%)
  • Education Service (6.5%)
  • Home / Construction (5.9%)
  • Automotive Service (3.3%)
  • Informatics / Electronics (3.2%)
  • Entertainment / Recreation (1.3%)
  • Cleaning (0.6%)
  • In terms of growth rankings, the top 11 best-performing franchise sectors in Brazil in 2019 were (ranked by % of growth):
  • Home / Construction (10%)
  • Informatics / Electronics (10%)
  • Services & Other business (8.3%)
  • Education Service (7.4%)
  • Health & Beauty (7.2%)
  • Automotive Service (7.2%)
  • Fashion (+ shoes & accessories) (5.7%)
  • Food (5.6%)
  • Entertainment / Recreation (5.4%)
  • Hotel & Tourism (5.2%)
  • Cleaning (4.7%)

Local Brazilian franchises dominate the market across many sectors, controlling 94.8% of sales volume; while foreign groups (5.2%), mostly from the U.S., are making headway. According to ABF, 214 foreign franchise brand concepts, from 30 countries, currently operate in Brazil, of which 81 are based in the U.S.

Foreign Franchises Brands in Brazil

%

USA

38%

Portugal

10%

Spain

8%

Italy

6%

U.K.

6%

Argentina

5%

France

5%

Canada

4%

Germany

2%

Australia

2%

Others

14%

 

214+ International Brands in Brazil

%

Food

26%

Health & Beauty

18%

Fashion (+ shoes & accessories)

13%

Education Service

12%

Home / Construction

7%

Services & Other business

6%

Automotive Service

5%

Cleaning

5%

Informatics / Electronics

3%

Entertainment / Recreation

3%

Hotel / Tourism

2%

Brazil has 5,570 cities, there are franchise operations in 2,671 cities countrywide or 48% of Brazilian cities.

The presence of franchise units is distributed throughout Brazil as follows, grouped by states geographically:

  • Southeast (56%)
  • Southern (16%)
  • Northeast (15%)
  • Middle West  (9%)
  • Northern  (4%)

Distribution by units by TOP 10 Brazilian cities:

#

REGION

STATE

CITY

1

Southeast

Sao Paulo

SAO PAULO

2

Southeast

Rio de Janeiro

RIO DE JANEIRO

3

Middle West

Distrito Federal

BRASILIA

4

Southeast

Minas Gerais

BELO HORIZONTE

5

Southern

Parana

CURITIBA

6

Northeast

Bahia

SALVADOR

7

Southeast

Sao Paulo

CAMPINAS

8

Southern

Rio Grande do Sul

PORTO ALEGRE

9

Northeast

Ceara

FORTALEZA

10

Middle West

Goias

GOIANIA

 

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 five out of the top 20 performing franchise brands (in terms of earnings revenue and number of units in operation) are foreign: McDonald’s, AM-PM Mini Market, Subway, and Burger King from the US; and Kumon from Japan.

#

BRAND

SECTOR

UNITS

1

O Boticário

Health & Beauty

3,806

2

McDonald’s

Food

2,459

3

AM PM Mini Market

Food

2,377

4

Cacau Show

Food

2,322

5

Subway

Food

1,864

6

ACQUIO

Informatics / Electronics

1,703

7

Lubrax +

Automotive Service

1,643

8

Kumon

Education Service

1,563

9

Jet Oil

Automotive Service

1,491

10

CVC Brasil

Hotel / Tourism

1,414

11

Óticas Carol

Health & Beauty

1,335

12

Segurlata–Bolsade Seguros

Services / Insurance

1,325

13

Wizard by Pearson

Education Service

1,260

14

Burger King

Food

1,209

15

BR Mania

Food

1,181

16

Óticas Diniz

Health & Beauty

1,154

17

Bob’s

Food

1,047

18

Correios

Services & Other business

   994

19

Farmácias FTB

Health & Beauty

   992

20

Dia%

Food

   865

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 the expectation 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 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, 163 Brazilian brands are present in 107 countries in all continents. 67 of them operate in the USA.

Resources:

• World Franchise Council www.worldfranchisecouncil.net

• Brazilian Franchise Association www.portaldofranchising.com.br


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