SPOTLIGHTON: LATIN AMERICA
¡Vamos! T
William Le Sante analyses the franchise markets in Latin America and finds some lucrative prospects
here was a time when franchisors in the US and Europe would dedicate their efforts to expansion into many regions of the world. US brands would export their concepts to Europe,
Asia, the Middle East and lastly, Latin America. European concepts would first expand regionally and then into the US; Latin America was viewed with less potential for expansion. There are many reasons for this: political instability, safety concerns, currency fluctuation with high interest rates and a limited middle class as a consumer. Many US brands failed and the outlook in the 80s and 90s was bleak. As the new century approached, we saw the region stabilise itself, attracting many brands,
some for the second and third time. Franchisors in the US and Europe favour Mexico and Brazil as their initial target countries for expansion in this region. These countries have the largest population base, large cities and a growing middle class. They both have franchise regulations and require disclosure and registration prior to entering into an agreement. The cost of retail space can also be challenging as consumer demand grows and brands saturate the markets.
Brazil is one of two countries in the Americas with a high level of protectionism; importation of foreign goods and equipment
is difficult even for the experts. This is one of the major reasons that more than 80 per cent of franchise systems in the country are home grown. Although much patience is required, it is a very lucrative market and well worth the effort. The ABF, Brazil’s franchise association, continues to work with the federal government on behalf of their members in an attempt to streamline some of these restrictions. The ABF is also the organiser of one of the largest franchise exhibits in the world – second only to Paris – held every June in Sao Paulo. The dark days of the drug cartels and anti-government militias are long gone in Colombia. A country with a highly educated population of more than 47 million, it boasts a strong middle class and a stable government. Franchising is regulated through commercial laws and disclosure and registration are not required.
Consistent economic growth in Peru, coupled with fast expansion of franchise systems, makes this a very lucrative market and many international brands are enjoying successful growth. With blueprints on hand for further retail development, we see a bright future for new brands coming to this
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