The double bet of the franchise: sell at low cost and export

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After the pandemic crisis, the franchises managed to recover significantly and last year the mode grew nearly 20% in the number of new openings, the highest level in 10 years, according to industry estimates. At the moment, the 1,500 franchised companies (95% national) have, together, 42,000 points of sale, and their turnover it already accounts for 22% of retail sales. By 2023, the sector is expected to grow by 12% despite the economic crisis, high inflation and the uncertainty of election years.

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Franchising is postulated as a refuge for small or medium-sized investors, as an alternative to “self-employment” or even as a complement to already established businesses. Something like this is offered by Rapipago, the service collection platform of the Gire group, which has expanded its network with over 10,000 granted franchises and 80 owned stores.

Clothing (40% of the total) and gastronomy (30%) are the leading items, but connoisseurs warn that there are several that have caused a sensation (hamburgers, breweries and dietetics) and that today I’m on the verge of saturation. Year after year, new concepts are added to the system, including gyms, clinics, bike shops, hardware stores, temporary rentals, pet stores, vegan food, and even paddle tennis court management.

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A more complete but partial look is offered by the latest Argentine Franchising Guide (GAF). Launched last month under the auspices of the Argentine Association of Brands and Franchises (AAMF), the publication highlights that in the 12 months from June 2021 to the same month of the previous year 2,201 new openings were registered among the 176 participating brands. It is a small universe (almost 12% of the total) but very representative because the main chains of the country are included.

Measured by number of stores, the ranking is led -as stated- by Rapipago, Grido (1,650 in the country and 255 abroad) and Lave Rap (1,489). The top ten is completed by DIA (705 franchised and 263 owned), Sei Tu (390), Colorshop (300), Bonafide (256), Pinturerías del Centro (210), Instituto Colbert (196 franchised and 8 owned ) and Havanna (190 franchised and 50 own branches).

There are sectors that are oversupplied. In the ice cream parlors there are more than 50 brands. The same goes for brands of pizza or empanadas. There is stiff competition for new affiliates”, warns specialist consultant Carlos Canudas. In some cases, saturation is an incentive to create new expansion formulas. Two ice cream shops, Grido and Sei Tu, appear in the top five of the GAF ranking.

Many brands, even in areas with the highest number of franchise companies, plan to add new partners to their networks both domestically and abroad. “The growth of deductibles in a context of crisis seems counterintuitive. But the lack of investment options is a spur to the franchise,” says Ezequiel Devoto, executive director of the AAMF.

The development of the franchise in Argentina evolves inside and outside the country. Pioneers in Argentina were Lave Rap, the national fast food chain Pumper Nic and the Ilvem academies. Since then, he hasn’t stopped adding brands and franchised stores. The pandemic, however, has dealt a severe blow. The 2020 financial statements close with a net loss of 2,650 points of sale (7% of the total) and those maintained have adequate operations, with partial closures and less staff.

Last year was the recovery and in 2022 there was a record of new openings, according to the provisional calculations used in the sector. With one more aspect: the export vocation of many brands. “Every Argentinian company looks outespecially since royalties are collected in hard currencies,” says Santiago Salcedo, of CentroFranchising.

The exponential leap in the formula is due to several factors. One of these is the low cost format of some models, which allows you to start a business with a limited investment. “The market is a separate country, because there are people who buy a job by buying a franchise. This has become more acute during the pandemic,” says consultant DanielArce. It is an alternative for the self-employed that can be accessed for US$10,000average.

Pablo Cappa, of the consulting firm Lepus, warns of another problem: the lack of personnel of any kind to deal with franchises. “It is difficult to find doctors, architects or technology professionals and also to attend local food businesses or empanadas, for example,” he describes.

Most expect another year of expansion, based on what happened in 2022. According to the GAF, the companies that opened the most (as of June last year) were Rapipago (890), Grido (101), Instituto Colbert (62), Instituto Neone (60), Big Pizza (50), CentroPinturerías (45), Infopan (41), DIA (33), Eddis Educativa (32) and Instituto Balcarce, Sei tu, Costumbres Argentinas, Almundo and Smartdrink ( 30 each).

Consultant Marcelo Shijman argues that the market is diversifying (“sub-categories are being created, such as specialty coffees, French pastries or invisible orthodontics within the health category, for example”) and that many franchisees are buying several, which in jargon are call “multi-franchisee”. About 2023, “An excellent first half is expected and a brake on the second due to the elections”.

As mentioned, the export vocation was strengthened by the local economic difficulties. It is estimated that around 10% of franchisors are present in other countries.“Argentina is the leader in the region with more than 1,500 outlets abroad,” says the GAF. The ranking is led by Grido (255 outlets abroad), Havanna (224), Infopan (93) and Colorshop (48). Behind them are Freddo (47), Instituto Colbert (30), Pirka (23), Bonafide (22) and Almacén de Pizzas (19).

expansion models

Of Cordovese origin, Grido is considered the 4th chain of ice cream parlors in the world.

Of Cordovese origin, Grido is considered the 4th chain of ice cream parlors in the world.

In the universe of franchises there are two brands that stand out for their exponential growth. One is Rapipago, whose format (collecting bills and services, above all) allows it to work alongside other businesses already installed, such as kiosks, betting offices and drugstores. The other is Grido, the low-cost ice cream parlor chain from Cordovan, which has almost 2,000 points of sale in the country and abroad.

In recent years, Rapipago and Grido have been the franchises that have grown the most. Rapipago has expanded through various models and today its network has more than 10,000 points of sale. Of that total, 80 own stores. Rapipago was born in 2001, in the midst of the convertibility crisis.

The commercial director of the Gire group, Walter Barisone, says he expects to close the year with 11,000 points of sale, or rather payment points. Rapipago is not the traditional franchise. On the contrary, it has no cost and the company installs everything necessary to operate free of charge: computer, armored panel, safe and alarm.

The decision to grant the franchise is made on the basis of demographic analyses, to avoid overlapping coverage in the same area. “There are companies that add the service as something secondary and then it ends up being the main activity,” explains Barisone.

Grido is a notable case. Born in Córdoba, today he is an icon of the province, together with Arcor and Naranja X. Today it is considered the 4th chain of ice cream parlors in the world. They have 1,970 franchised stores distributed between Argentina, Chile, Uruguay and Peru. They also export 5 million kilos of ice cream to Bolivia, from their 16,000 square meter manufacturing facility.

The company does not have its own headquarters and its origins are rather particular. Sebastian Santiago, director of the chain and one of its owners, explains that his father (78 years old and also a manager) owned an artisanal ice cream parlor “until in 2000 we were joined by 4 children, Lucas, Celeste, Gonzalo and myself.” .

Together they reformulated the business on the basis of the franchise model. The company’s data is impressive. They produce 84 million kilos annually and expect to reach 103 million for the next summer season. “Sales are up 15% and 2022 has been a record year. There are two reasons. The first was the heat wave, we have a very hot summer. The other issue was the World Cup, which was played between November and December, which stimulated consumption.”

The fast food sector is also in crisis: the leading chain, McDonald’s, now has 222 points of sale in the country, both owned and franchised. “Arcos Dorados has the exclusive right to grant franchises in approximately 20 countries in the region, including Argentina, Brazil, Chile, Colombia, Costa Rica and Uruguay,” said Eduardo Lopardo, general manager of the company that owns the license.

Close behind is Mostaza, the national chain which today controls 180 points of sale, including its own and in franchises. “Last year we opened 27 stores and this year we plan to add between 25 and 30”, says Pablo de Marco, director of Expansión de Mostaza. The executive describes that the establishment of the brand (“we have been on the market for 30 years”) favors them and “allows the addition of new affiliates”, in a context of crisis such as the current one.

Source: Clarin

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