Brazil Experiences Franchising Boom

In Brazil, where young workers have typically opted to join large corporations in the public or private sector, statistics now confirm a rise in young entrepreneurs choosing instead to run their own franchise. According to the Global Entrepreneurship Monitor, the number of Brazilians aged 18 to 24 that attempted entrepreneurship increased by 74% between 2002 and 2010, with the franchising model being the simplest and safest way to run their own business. The sector has experienced a 10-13% average annual increase since 2002, generated a profit of $44 billion USD in 2011 (89 billion reals), and is responsible for 837,000 jobs.

The greatest draw towards franchising for Brazilians has been the slimmer chances of failure due to its business model. According to business support organization Sebrae, the risk of business failure for Brazilians in franchising drops from 80% to 15%. The strikingly lower success rate has resulted from several factors, explains Jaqueline Costa of Sebrae, including the franchiser's developed methodology and communication strategies, preexisting suppliers, knowledge of target markets, and a brand that is typically established with well-known products.

Although there is an attractive element of security that comes with opening a franchise, Brazilians also admit that there are still risks involved with franchising. Initially, the entrepreneur must be able to decipher whether or not the brand is popular, how it is doing in the market, and if there are any restrictions that come with opening a new franchise. The franchising model of business also heavily restricts the entrepreneur's creativity, seeing as everything associated with a franchise is already set to standardized measurements.

In spite of the risks, Brazil's franchising boom continues to show no signs of slowing down, and it is expected to grow by 15% in terms of profit in 2012. While there are currently 2,031 brands in Brazil, that number is also expected to grow by 10% this year, making Brazil one of the largest countries in the world in terms of number of units. Around 11% of Brazil's franchising sector are from foreign-based franchisors, which means that this franchising boom also provides an immense opportunity for international franchises looking to expand into Brazil.