Brazilian brands representing a variety of sectors, from restaurant chains to fiberglass pools and fashion accessories, are in Atlanta this week to learn about the U.S. market, following up on a franchising push by members of Mayor Kasim Reed’s business delegation to the country last April.
Led by the Brazilian Franchising Association, or ABF, a national organization, the group made the stop before heading to the International Franchise Association’s annual convention in Las Vegas Feb. 15-18.
Hosted at Invest Atlanta downtown on Feb. 12, they heard about Atlanta’s role as a hub for the franchising industry, with its ample pool of professional-services expertise, the world’s busiest airport and the national or global headquarters of powerhouse brands like Intercontinental Hotels Group, Arby’s, Church’s Chicken, Popeyes and many more.
This wasn’t the first time ABF leaders had heard the pitch: Metro Atlanta Chamber President Hala Moddelmog, former president of Church’s and CEO of Arby’s, had the chance to sing Atlanta’s praises in a seminar during the mayor’s 2014 trip. As reported by Global Atlanta in its on-the-ground blog covering the mission, Ms. Moddelmog invited the ABF to visit this February.
Morana, a women’s accessory brand with more than 300 stores in Brazil, has gotten the message. Not only did it move its headquarters from California to Norcross recently, it’s also looking to open its second U.S. store in Lenox Square Mall, with more on the horizon.
Company leaders told Global Atlanta that they decided on metro Atlanta over Miami, a well-trodden gateway for Brazilian firms to the U.S., because they felt it was a better place to push into the mainstream for their brand, which they’re positioning as an upscale but accessible line of necklaces, bracelets and other accessories.
“Florida is not typical of U.S. customers. You see a lot of Hispanics, a lot of Brazilians, a lot of different cultures. In Atlanta, you have a real picture of the market of the U.S.,” said Eduardo Morita, business director for Grupo Ornatus, which owns the Morana brand. Florida may come later, but “it’s important to get great focus in Atlanta, Houston, maybe Washington — the real U.S. market.”
The company is moving slowly, taking a data-driven approach to ensure it’s protecting its investors. Its long track record in Brazil was built on the hard-earned success of its Korean immigrant founders, who got their start in the restaurant business. The company still operates more than 100 pan-Asian and Japanese outlets in 10 Brazilian states. In its U.S. fashion business, it plans to build out retail and e-commerce operations simultaneously, using each to drive the other.
In Brazil, fashion and cosmetics brands are more often franchised than in the U.S., in part because malls are growing quickly to meet the demands of the burgeoning middle class. Also, having multiple outlets helps each one stay under revenue thresholds where they would face higher tax rates.
Andre Friedheim, international director for ABF and co-owner of Francap, a consulting firm, said it’s hard for even large Brazilian brands to break into the U.S. market where they’re all but unknown. Still, franchising is a business for those with an entrepreneurial spirit, so they’re always looking outside Brazil, he said.
That’s especially true now: While Brazil’s economic growth is projected to be flat this year, the franchising industry aims to hit 7-9 percent in revenue growth. That’s just enough to outpace the targeted inflation rate of 7 percent set by the central bank.
While conceding heavy challenges with logistics, currency and taxation, Mr. Friedheim took the opportunity during his presentation to tout Brazil’s own attractiveness as a franchising market. For starters, it has more than 200 million people, many of whom now have disposable income for the first time.
Citing numbers from the World Franchise Council, he said Brazil ranks No. 3 worldwide in the number of franchise brands with 2,700 —ahead of the U.S.’s 2,500 — and that it’s No. 6 worldwide in franchise store locations.
The government has special policies encouraging foreign investment in the sector, he said, though it’s largely targeted at luring them into areas of the country where growth hasn’t been as brisk. More than 70 percent of revenues in Brazil’s franchising industry come from three prosperous states in in the Southeast: Minas Gerais, Rio de Janeiro and Sao Paulo.
Those that succeed in Brazil will likely be the brands that understand it’s best to come in with a partner and to build out a supply chain in the country.
Mr. Friedheim believes ongoing talks with Atlanta will similarly help clarify for Brazilians the path to success in the U.S. market.
“We want to learn from franchising companies in the U.S., and we also want to bring and share our best practices,” he said.
Contact Invest Atlanta for more information about the visit: www.investatlanta.com.