Specialist advice
Ola Brazil
It is the future host of the World Cup and Olympic Games, it was the last in recession and one of the first out, and has always been home to the best carnival in the world, invest in Brazil says Marcelo Cherto
Since the headline on the cover of The Economist read ‘Brazil takes off,' any company - franchisor or not - with plans to grow internationally may be neglecting a very valuable opportunity without Brazil on its radar.
For decades my country was considered ‘the land of the future,' however for some time, it seemed unclear that such a future would ever arrive. Today, I am happy to tell you, thanks to the good sense of the present federal government (as well as the last one) political and economic stability, and a well regulated and managed financial market has finally arrived.
Of course, if you have connections in the commodities market there is a chance you already know that Brazil is the world's largest exporter of sugar, coffee, orange juice, beef and chicken, and ranks amongst the largest producers of ethanol, iron ore, pulp, soybeans and other commodities. And should the pre-salt drilling generate the expected outcomes, it may soon become an important oil exporter.
I'm also convinced that many Europeans and Americans are not aware of Brazil as a major player in the aircraft manufacturing business!
According to the most recent data published by the Brazilian Franchise Association, there are more than 1,540 franchisors established in the country, ranging from cosmetics, hotels, food services to universities, clinics and several other industries - with 85 per cent being locally born companies.
Combined, these franchisors have more than 80,000 franchises in operation within Brazil alone. And at least 66 of them have expanded their chains across the border, to at least 49 other countries around the world, and at least 40 more have plans to do the same in the near future.
Brazilians have ‘bought' into the idea of franchising as a safe port for anyone willing to start a business. In 2009 the Franchise Expo in Sao Paulo had more than 260 exhibitors and attracted almost 40,000 people.
In December 2008, my partners in Grupo Cherto and I opened Franchise Store, a 485 metres squared commercial space located in one of Sao Paulo's prime retail areas, to sell franchises. Our plan was to sell a total of 80 franchises in 2009.
A year later we were offering 62 brands and had sold almost 200 franchises. Recent history allows to believe the market will keep growing, as will the interest of both franchisors and prospective franchisees in the services Franchise Store offers.
Total sales of franchise systems in Brazil grew by 19.5 per cent in 2008, 15 per cent in 2009 and are expected to grow at least 14 per cent in 2010. And the international sports events that will take place in Brazil in the coming years (the World Military Games in 2011, the World Cup in 2014 and the Olympic Games in 2016) will surely attract lots of tourists with money in their pockets. This will increase consumption of all types of products and services, ultimately motivating more people to invest in new business. Of course, for any foreign company looking to expand abroad, it will have to do its homework to succeed.
Brazil is not an easy country. Its size and diversity makes it look and feel like many countries compressed into one. The legal system is complex and the government bureaucracy may be difficult for someone not used to it. Also, for people who have not lived in Brazil for a long time local culture may not be as easily understood.
Most of those challenges, however, can be easily overcome if the foreign franchisor is willing to really understand the market and invest time in identifying the right people to associate with (partners, lawyers, advisers, managers, etc).
Expanding into Brazil may present its challenges, not only from what has been mentioned above, but also because many of the local franchisor companies are well structured and ready to fight to keep and increase their market share. However, for those who believe their companies are ready to grow internationally, it's certainly worth looking at the possibility of entering Brazil.
