Franchise Sector Sees Over Six Percent Growth in First Half of 2019

RIO DE JANEIRO, BRAZIL – The national franchise sector revenue grew 6,4 percent over the first half of the year. Revenue climbed from R$79,496 billion (US$19.8 billion) to R$84,586 billion.

The data are from the Brazilian Franchising Association (ABF). Over the past twelve months, the franchise market revenue has grown by 6.9 percent, reaching R$179.933 billion.

In the second quarter, the sector recorded a nominal growth of 5.9 percent when compared to the same period last year, with revenue rising from R$40.734 billion to R$43.122 billion.

According to the president of ABF, André Friedheim, franchise networks “are performing above the independent business average. We have strong brands, scale gain, plenty of innovation”, he said.

He reported that the franchise market has new formats that allow companies to work more efficiently, although, despite the positive result, the sector has in the past seen better numbers than the current ones, which have suffered the effects of the economic crisis.

This factor has led the ABF to revise the annual revenue growth projection from eight percent to seven percent. Other predictions were maintained and involve an increase of five percent for employment, five percent for franchised units, and one percent for franchised networks.

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André Friedheim stated that micro franchises play a major role in the growth of the sector, as they represent lower investments. The more expensive traditional franchises have had a better performance.

Services and other businesses (8.9 percent) were the fastest growing franchise sector in the second quarter of 2019, according to ABF. The eleven sectors monitored by ABF showed an increase in the second quarter when compared to the same period in 2018.

Education services expanded by 8.7 percent, with new areas such as games and robotics, for instance, in addition to language school franchises. In third place are communication, information technology, and electronics, up 8.5 percent.

The services and other businesses segment continued to lead in the first half of the year, up 9.3 percent, followed by home and construction and communication, IT and electronics, up 9.1 percent each. Education services ranked third in terms of expansion, rising 8.4 percent.

André Friedheim estimated that services should continue to accelerate throughout the rest of the year, although there are prospects of recovery in food franchises over the second half, with growth adapted to new platforms, with lower freight, greater penetration, and ease of delivery.

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Total direct jobs generated by the franchise sector increased by ten percent in the second quarter of this year over the same quarter a year earlier. The number of workers with registered employment contracts rose from 1,224,987 to 1,348,235.

According to ABF, franchises are beginning to penetrate other cities, leaving the Rio de Janeiro-São Paulo hub. Currently, 45 percent of Brazilian municipalities have a franchise operation.

The highest increases, in terms of revenue, were observed in the South region, from 9.7 to 10.3 percent of the total market; the Northeast (from 13.6 to 13.9 percent) and the Midwest (from 8.4 to 8.6 percent).

In relation to states, Santa Catarina (four to 4,5 percent), Mato Grosso (1,9 to 2,1 percent) and Minas Gerais (7,7 to 7,9 percent) were the ones that most gained a share of the revenues.

The president of the ABF believes that the 13th Rio ABF Franchising Expo, which will take place between September 12th and 14th, at the SulAmérica Convention Center, in Rio de Janeiro, has high expectations in terms of results for the sector.

Friedheim expects an attendance of 22,000 visitors during the event.

Acclaimed as one of the most significant franchise trade shows in Latin America, Expo ABF Rio will include some 200 exhibiting brands from the most diverse segments.

For the second time, the show will feature a space reserved for Portugal, where business
opportunities for Brazilians who relocate there will be displayed.