Brazilian franchisors put the brakes on internationalization process

RIO DE JANEIRO, BRAZIL – The president of the Brazilian Society of Retail and Consumption, Eduardo Terra, evaluates 2021 as a year of accommodation.

Many Brazilian franchisors have put their foot on the brake in the internationalization process. “Until the pandemic started, 20% of new members were Brazilian,” says Cristina Maria Matos, CEO of the Portuguese Franchising Association. “Now everything is in a holding pattern.”

The affinity with the language and culture has made Portugal one of the most sought-after destinations for Brazilian franchises, second only to the US. Last year, 41 chains operated in Portuguese territory, seen as a gateway to Europe. The familiarity, however, does not diminish the size of the challenge, nor the need to adapt to the local reality. “The language helps but represents at most 10% of the process,” says Cristina. “The tax part is complex, so is the way of communicating, as well as the way of doing business.”

Daniel Miglorancia, partner at Nutty Bavarian, knows what that means. The chain chose Portugal to start operating in the European market. Despite knowing the country very well, it ran into problems common to other markets: the need to partner with a local businessman, the mistrust of a brand that is little known by the consumer, and the difficulty of opening the first point of sale. “We spent two years testing the penetration of the product,” he says. “We didn’t give up, we will resume the process after the pandemic.”

Precisely to facilitate and foster the expansion of business networks and franchising between Portugal, Spain, and Brazil, the Bittencourt Group signed a partnership with the Your Group, a Portuguese company, specialized in management support, and opened in February the Bittencourt Europe office.

“We have complementary expertise, which guarantees a complete delivery of the project of development, management, and internationalization of brands, besides the development of concepts and evaluation of channels for expansion,” says CEO Lyana Bittencourt. “I always had the dream of growing the company internationally, and I believe that the moment is very propitious since companies need to transform themselves to have perenniality.”

According to ABF, 163 Brazilian franchises operated in 106 countries by December 2020, the same number as the previous year. The US remains the main destination, with 61 brands, followed by Portugal (41) and Paraguay (36). “The internationalization process of Brazilian chains has matured in recent years,” says Natan Baril, international director. “The agreement signed between ABF and Apex, which has just been renewed, collaborated a lot for this to happen.” In 2021, the focus of work will be on strengthening relations with international entities, such as the Iberoamerican Franchise Federation and the World Franchise Council, to expand the range of countries with national brands and create a more effective business channel.

The Latin American market is the starting point for many Brazilian chains when it comes to testing new markets. This is what the Bahian company Clean New did, specialized in upholstery shielding and cleaning. “The attraction of the first franchisees in Colombia and Argentina came about through the exposure of the brand in social networks,” says CEO Fritz Paixão. “We sought help from a consulting firm to ensure the success of the expansion. The results were surprising. In 2020, revenues grew 95% in Argentina and 35% in Colombia.” The arrival in the USA via Miami, however, led Paixão to prepare for higher targets. By 2022, the chain will concentrate its efforts on expanding to Europe, starting with Spain.

With information from Valor