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November 15, 2004

Franchising in Brazil

Update, Nov. 17: My old link to the quote went bad. I think this one is to the same report, in pdf: report on U.S. trade with Brazil:

I just came across the interesting fact that franchising has been highly successful in Brazil.

After nearly two decades of success in Brazil, the franchising system continues to boom. As of 2002 it accounted for 25% of the gross revenue in the retail segment with around 800 franchise chains and 56,000 franchise units, divided into approximately 30 business segments, generating over 350,000 jobs. ...

Between 2001 and 2002 the Brazilian franchising system boasted more than eight billion dollars in sales. According to ABF, the continued growth of franchising in this market has strengthened Brazil's franchising system to such that it is now one the world's third strongest, outranked only by the United States and Japan.

According to local sources, the continued success of the Brazilian franchising system is in part due to the increase in participation of already consolidated businesses exploring alternative avenues of expansion. Local Brazilian companies form the vast majority of franchises in Brazil (about 90%), however, foreign groups, particularly from the U.S., are making their way into the market too.

Strict regulations preventing foreign franchises from remitting royalties to their headquarters contributed to the dominance of Brazilian franchises over their foreign counterparts. However, the reform of the Franchising Law in 1994 has granted greater investing opportunities to foreign franchises. Foreign franchises are now allowed to remit royalties to their countries of origin. However, U.S. franchisors must adapt to meet required market norms and standards, invest in market research, test market receptivity through pilot projects and adjust their concepts to Brazilian business practices and consumer tastes. In Brazil, franchise consultants refer to this process as the "tropicalization" of the franchise.

This sounds like an opportunity for businesses in other Third World countries.

Posted by erasmuse at November 15, 2004 08:49 AM

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The US link seems to be broken. I would like to read more about this, in the hopes of finding more details on "tropicalization."

Posted by: bc at November 16, 2004 09:07 AM

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