Going for Gold
Olympics, World Cup, just two reasons to explore Brazil
Brazil is a huge market, but there are regulatory issues and high tariffs to consider.
About 2 million Brazilians visited the U.S. last year, according to Renato Sabaine of the U.S. Commercial Service office in Brazil. And trust him, when they return home, they brag about where they ate. And if you have units open in Florida, even better, because almost three-quarters of the Brazilian tourists go to Florida, Sabaine says.
Ample tourists is one good sign your brand will be recognized when you go into a foreign country, even if you’re not a McDonald’s or a Subway. But it doesn’t stop there, Ryan Kanne of the Minneapolis Commercial Service office, says. McDonald’s, which has long lines in Brazil, even though it’s “crazy expensive to eat there,” advertises every day on TV, as does Coca-Cola. Attracting Brazilian investors centers on that same premise: Advertise you’re an American franchise, says Sabaine.
Although there are some cautionary tales about franchising in Brazil, the upcoming Olympics and soccer’s World Cup are improving the infrastructure and creating a need for franchises to service the millions of tourists who will be attending the two sporting events in the next three years—and hopefully the locals for years afterward.
A down side, as seen in daily newspaper coverage, is because there’s such a divide between the rich and poor, many financially struggling Brazilians are protesting the government spending millions of dollars on building stadiums in 12 cities instead of on social and educational programs.
Food franchises work well in Brazil, but other concepts may have a harder time. Two areas Sabaine mentioned that may be problematic are home care for seniors— “The local nurse is the solution for Brazilians,” he says—and gyms, because a gym membership requires a doctor’s approval.
International brands compete with a strong local playing field. About 95 percent of franchises in Brazil are local, according to William Edwards of Edwards Global Services. Of the 206 international brands already operating there, 45 percent are U.S. based, Sabaine says.
Relationship building is paramount in Brazil. “Managing the expectations of the partner is key to success here,” Sabaine says. Brazilians value the person they do business with more than the firm, according to “Kiss, Bow, Or Shake Hands,” a guide to doing business in 60 countries. Other considerations: identifying and working with the right supply chain and adapting the food product to the local tastes. Brazilians tend to like their treats less sweet than Americans. So for instance, if you were bringing a cinnamon roll to Brazil, he says, you would decrease the sugar and increase the cinnamon.
Brazil has a defined franchise law with specific issues related to real estate, initial territory fees, publicity fee, franchise fee and royalties, among other items, Sabaine says. Tariffs are also high. “A local lawyer specialized in the sector must be involved in the franchise negotiation,” he adds.