The franchise system continued to expand throughout 2023 and will continue to grow this year despite the recession, according to investigations by the Argentine Association of Marche and Franchising (AAMF) and the Argentine Franchising Guide (GAF), two entities specialized in this sector.
The AAMF 2023 report shows that, over the last year, 79% of brands have opened at least once and, consequently, the network of it grew by 8.8%.
Considered a proven business format, which managed to overcome the pandemic and the economic crisis without major traumas, franchising is also a good gauge of consumption, the main component of the local GDP.
At the beginning of 2024 points of sale operating with the franchising formula They exceeded 51,500 and, according to AAMF projections, they could close this year with more than 53 thousand. They employ 245,000 people, between owners and employees. The question of employment, in fact, looks like this one of the keys to expansion scheduled for this year.
“Many people were left without work he will try to invest his compensation to continue in the business, guarantee an income and for this reason the franchising model is an excellent alternative. A recovery in consumption is expected in the final months of the year,” he said. Susanna Perrottapresident of the AAMF.
Roberto Russodirector of the Guide to Franchising (GAF), agreed that the layoffs announced at several state agencies could end up impacting the a wave of new franchises by people looking to invest a portion of their compensation in a business in this format.
“We’ve already seen it. And this time, with the expectation that, if the government’s DNU is validated by Justice, it will contain an article that they could multiply jobs within our system,” added the manager.
In its article 96, DNU 70 of the Government provides for the possibility that a single tax payer can rely on five workers also enrolled in this regime, without there being a dependency link.
“On average, franchising They generate seven jobs for each store, ranging from large businesses with 30 employees to businesses with no more than three. A modality like the one proposed by the DNU would collaborate exponentially in the creation of new jobs”Russo noted.
The rate is not negotiable
The franchising system emerged in the United States at the hands of Isaac Singerwho in 1851 had patented his prototype sewing machine and seven years later created the Singer Sewing Center, intended to train those interested in selling the brand’s sewing machines.
In Argentina the system emerged in the early 1980s, the precursor being the brand Lave-Rap.
The number of brands used by franchises today is 1,783according to the AAMF, which found that over the course of the year, 157 brands, new or traditional, adopted this format.
The body’s work ensures that 97% of the franchisors consulted plan to open a total of 2,060 new points of sale, a figure which, if confirmed in practice, would allow closing the year with a total of 2,060 new points of sale. 53,600 franchised stores.
“The franchising model has proven to be successful, but the numbers are different depending on the sector in question. Last year we had significant growth but less than previous years, mainly because it was an election year and this affected expectations. For this year we are optimistic, despite the crisis,” said Perrota, adding that in times of crisis in the internal market, brands try to “protect” the franchisee in various ways, “but “It’s very difficult for them to lower their membership fee or monthly royalties.”
How much are these expenses?
Sebastiano Kantor, founder and current director of the chain The coffee shopwith 57 franchised stores, explained that to install a 140 m2 store, the minimum investment to acquire a franchise is 110 million pesos plus VAT. Includes an initial fee of $8 million and 4% of sales (ex-VAT) per month.
According to Kantor, the franchisee’s investment in The Coffee Store pays for itself between 24 and 28 months, although 40% of the proceeds are reinvested. “This year we expect the opening of between 10 and 12 new points of sale throughout the country. Last year we celebrated 25 years on the market and we renewed our identity, trying to include younger people in the target, achieving growth that doubled the average growth of the system”, added the entrepreneur.
A significant fact in these times of crisis is that there are brands that they orient themselves towards when choosing their franchisees families with the older children integrated into the business.
“It’s something we’re seeing, for example, with ice cream chains, which are low investment businesses and therefore a classic variant of self-employment” Russo said. “They prioritize family groups where the couple and two adult children workbecause they believe it does more sustainable franchising over time.”
For this year, expectations on franchises appear divided. According to the AAMF survey, companies recreate favorable expectations for the second half of the year and they are confident in a greater demand for franchising in a context of contraction of the public sector and part of private activity.
For this year, half of the companies consulted by the AAMF work aspire to achieve higher than planned returns. But difficult months lie ahead for consumption: a report from the BBVA bank indicates that retail consumption “has collapsed with drops not seen since the 2020 quarantine”. The BBVA’s work estimates a decline in private consumption for the entire year 3.4%.
In this context of declining domestic consumption, Kantor assures that the release of The Coffee Store abroad is a good way to strengthen the business.
“Last year we grew more than 25%, but in the first quarter of this year we recorded a drop of almost 25% in the number of diners, which translated into a 19% lower collection compared to the first quarter of 2023. The good news is that the first franchise in Chile will be inaugurated in April, which will be added to the existing one in Paraguay,” said the entrepreneur.
On the other side of the counter, as a franchisee, Soledad Delgado acquired, more than two years ago, a franchise of Vacalin, in the capital. “It was a very positive experience, which allowed us to strengthen our family income, without paying the famous basic fee for not knowing the sector or having knowledge in business management. The business model simplifies our work and we don’t have to deal with issues we don’t know about.” Nonetheless, he faces difficult months: “We pay a 1.8% commission for promotions and get paid after 20 days. Prices are also said to drop, but in March the supplier group highlighted between 20 and 30%“said Delgado.
From the Tourist, the traditional chocolate brand from Bariloche which turns 60 this year, has been marketing the franchising format for more than 20 years, with a network of 18 stores in Argentina and four in Chile. This year they hope to make new openings in Argentina, but also in Uruguay, Paraguay and Peru. But first they have to face the difficult first months of the year. “So far, in 2024, we recorded a substantial decline, in line with the decline in consumption in general“, She said Ximena DalessandroBrand Marketing and Product Manager.
Juan Gispert, of the city of Luján de Cuyo, in Mendoza, has chosen the brand of fabric sales stores as an affiliate Scissors, which has six franchises in the province of Cuyo.
“Last year we matched inflation. On average we sold 3% less in volume, but billings were slightly higher than inflation, with a slowdown starting in October. The situation worsened in the first quarter of this year and In March we saw a 30% year-over-year decline”, assured Gispert.
“What really happens with the franchising issue is that there are more and more areas,” said Russo, of GAF. “That, and the expectation of improvement in the coming monthsjustifies the optimism.”
Source: Clarin
