As we strive to be global experts in franchising, we spend a lot of time meeting and speaking to people all around the world, and Latin America is no exception. With the huge variety of people and their businesses that we encounter, we often reflect on the incredible different journeys they have all taken to be where they are today and sometimes feel the urge to ask them one simple question: Why?
Why are they sitting there today, and why are they so curious about what we have to say? Is it just because of the economic impact of franchising, or is there an even greater curiosity and spirit of adventure at play? If the world of franchising has taught us anything, it’s that every chance, every opportunity, every challenge, and every dream starts with a why.
You may wonder why this might be relevant to any plans you have to franchise in Latin America, but this concept of asking why has a great deal to teach us about how to succeed there, and perhaps also gives us an interesting insight into the future of franchising elsewhere in the world, too.
An exciting, emerging market
Latin America is an economically vibrant region with a five per cent average GDP annual growth rate. There’s a developing middle class with a disposable income, rapidly closing down a 1:10 gap in leading market indicators versus more developed economies.
Its regional franchise market is growing at a 25 per cent annual rate, currently counting over 6,000 franchisor brands including more than 200 global names, and its retail industry has grown at a 20 per cent annual rate during the last two decades. On average, each franchise brand has around 23 units – lower than the average of 217 units in the U.S., or 53 in Europe, but considerable growth in recent years suggests it’s a rapidly growing market that’s well worth watching.
There is certainly a great deal of opportunity in Latin America for those willing to take a chance, but as always when it comes to franchising overseas, it’s never as simple as just transplanting a business model from the U.S. or Europe and expecting it to instantly work. You need to have a deeper understanding of the culture and mindset of the market, and that’s where we come back to the ‘why’ we talked about earlier. In Latin America, there’s a very positive attitude towards franchising. It’s seen as an exciting and dynamic way of doing business and is even considered somewhat revolutionary in the way it can overturn older and more rigid business structures. For much of modern history, especially in Latin America, the voice of global and international business has been dominated by large corporations with traditional structures, but franchising has changed that.
It has proven very successful at integrating developing economies in a way that offers opportunity for people in those countries to have a global impact on business. Of course, franchising doesn’t ever exist in isolation – it always develops hand in hand with a country and its society – so as Latin Americans seek to embrace technology and globalization, so do they look to franchising to help them in a changing world.
Adapting to change
Undoubtedly, we are now experiencing some of the most volatile periods experienced in society and the global economy for generations. Across continents, we’re hearing about start-ups that achieved colossal dimensions at incredible rates fi nding themselves in ruin, or of companies that dominated their markets for decades or even centuries passing into oblivion.
On the one hand, the COVID-19 pandemic created a series of restrictions that have threatened to shrink the world, creating smaller and more self-sufficient markets where it will be increasingly difficult to create scale and critical mass for businesses and chains. On the other hand, the accelerated adoption of technology at this juncture gives a new meaning to globalization and international business, with unparalleled remote connectivity.
In this environment, brands must reinvent themselves, and franchising is seen as the most successful business model in terms of overcoming the challenges of changing times. For many Latin Americans, franchising represents an effective system for this reinvention, as well as a very attractive solution for brands who are seeking to leave their mark on a changing world. It encapsulates their very own story of ‘why’, meaning that franchising is taking on a role that’s more current than ever before – both in this market, and around the world.
The future of franchising
There’s a renewed sense of entrepreneurship among the new generations in Latin America, one filled with purpose that transcends borders. In the midst of chaos, violence, and social unrest, there’s a strong desire to challenge the status quo and question what worked before. While franchising is, by nature, global, this facet of the business has never been as relevant as it is today – not only for Latin Americans, but for all of us.
If you’re looking to embrace the future through international franchising, you need to have a strong understanding of this ‘why’; the deeper character and motivations that lie beneath the surface in any overseas market. Latin America is a fantastic example of where global franchising is headed and represents a fantastic opportunity for a new kind of expansion. However, like moving into any new region, it’s essential to connect with local experts so that you can adapt your franchise’s appeal to the local market, as well as add credibility to your brand.
With the right professional advice and support behind you, your brand could also leave old ways behind and embrace the future!
Farrah Rose is head of international development at The Franchising Centre and is a longterm member of the British Franchise Association. Fernando Lopez de Castilla is a founding partner of GNF Worldwide and ambassador for the International Franchise Association