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: 2022-01-23

Overview

Brazil is the fifth-largest market in the world in terms of the number of franchise chains. Currently, there are only 84 American brands operating in the country, and this represents a huge opportunity for U.S. concepts seeking to expand their presence internationally.

U.S. franchisors encounter strong competition in this robust market from Brazilian franchisors offering a variety of product and service solutions. According to the Brazilian Franchising Association (ABF), 163 Brazilian brands are present in 106 countries and 61 of them operate in the United States, highlighting the success of Brazilian franchisors globally. With its track record of success, even traditional retail companies in Brazil have started adding franchising to their channel expansion strategy.

In addition to market competition, the main challenge franchisers face in Brazil is identifying a potential investor as a master franchisee who has the ability and desire to scale the franchise quickly and effectively. Local investors are often interested in opening only one or two stores/restaurants in the first year, presenting a barrier to companies looking to expand nationally.

The Brazilian franchise sector is among the world’s largest and most sophisticated in terms of business practices and its ability to adapt concepts from both foreign and domestic franchisors. Interestingly, Brazil has specific legislation that covers franchising.

The sector had been growing annually, even outperforming the Brazilian economy. Unfortunately, the sector suffered some retraction in 2020, due to the pandemic that began in March of that year; however, the sector continues to show signs of resiliency going into 2021. In 2020, the Brazilian franchise revenue decreased by 10.5% to a total of US$ 32.8 billion (R$ 167.2 billion). This stands in clear contrast to the period consisting of 2016 – 2019 in which the franchise sector grew by 24%.

There are 2,668 franchising chains (a decrease of 8.6% compared to 2019, reversing an upward trend that started in 2017) and 156,798 franchising units are present in the country (a decrease of 2.6% compared to 2019, also breaking a growth sequence in the period from 2016 to 2019). Overall, Brazil is the sixth-largest market in the world in number of units and the fifth largest in number of franchise chains.

The franchise sector currently accounts for about 1.25 million jobs, a decrease of 7.3% over last year, (the sector had been generating jobs at rates higher than the country since 2016).

The Brazilian Franchise Association (ABF) projected sector growth for 2021 as follows:

  • Sector Venue 8%
  • Units 5%
  • Brands 2%
  • Employment 5%

These numbers reflect the resilience of franchising even against the economic consequences of the global COVID-19 pandemic.

The franchise sector revenue in Brazil is composed of:

  • Food (24.5%)
  • Health & Beauty (21.2%)
  • Services & Other business (15.9%)
  • Fashion (+ shoes & accessories) (11.5%)
  • Home / Construction (7.5%)
  • Education Service (6.6%)
  • Hotel & Tourism (3.9%)
  • Informatics / Electronics (3.6%)
  • Automotive Service (3.5%)
  • Entertainment / Recreation (1.1%)
  • Cleaning (0.7%)

Local Brazilian franchises dominate the market across many sectors, controlling 92.4% of sales volume; while foreign groups (7.6%), mostly from the U.S., are making headway. According to ABF, 205 foreign franchise brand concepts, from 30 countries, currently operate in Brazil, of which 84 are based in the U.S. (it was 81 in 2019).

Foreign Franchises Brands in Brazil

%

USA

41%

Portugal

10%

Spain

8%

U.K.

5%

Argentina

4%

Italy

4%

France

4%

Germany

3%

Canada

3%

Netherlands

2%

Others

16%

205 International Brands in Brazil

%

Food

26%

Health & Beauty

17%

Fashion (+ shoes & accessories)

14%

Education Service

12%

Home / Construction

7%

Services & Other business

7%

Cleaning

5%

Automotive Service

4%

Informatics / Electronics

4%

Entertainment / Recreation

2%

Hotel / Tourism

2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazil has 5,570 cities, there are franchise operations in 2,671 cities countrywide or 48% 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: McDonald’s, Subway, AM-PM Mini Market, and Burger King.

#

BRAND

SECTOR

UNITS

1

O Boticário

Health & Beauty

3,620

2

McDonald’s

Food

2,567

3

Cacau Show

Food

2,371

4

Subway

Food

1,863

5

AM PM Mini Market

Food

1,804

6

Lubrax +

Automotive Service

1,665

7

CVC Brasil

Hotel / Tourism

1,425

8

Óticas Carol

Health & Beauty

1,394

9

Seguralta–Bolsa de Seguros

Services / Insurance

1,325

10

Burger King

Food

1,302

11

Wizard by Pearson

Education Service

1,258

12

Jet Oil

Automotive Service

1,172

13

BR Mania

Food

1,132

14

Shell Select

Food

1,109

15

Óticas Diniz

Health & Beauty

1,107

16

Bob’s

Food

1,017

17

Odontocompany

Health & Beauty

   997

18

Correios

Services & Other business

   994

19

Help! Loja de Crédito

Services / Financial

   855

20

Chilli Beans

Health & Beauty

   847

As mentioned previously, finding suitable master franchisees in Brazil is very challenging for U.S. 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.

Resources

• World Franchise Council

• Brazilian Franchise Association

 

Contact Information

For more information, please contact the US Commercial Service Industry Specialist at renato.sabaine@trade.gov