“The franchise system has once again proven their ability to adapt to the challenges of economic instability. Despite the recessionary context we are going through, the data for the first half of 2024 added to the expectations of growth of more than 10% by the end of the year and almost 9 out of 10 brands actively seeking to open new points of sale reflect a panorama of sustained growth and demonstrate the power of franchising brands and the entrepreneurial spirit of Argentines,” said AAMF President Susana Perrotta.
Franchise networks continued to grow
During the first half of this year, 55% of the brands included in the survey stated that they expanded their point of sale networks with the opening of 195 POS.
This represents a growth of 3.6% compared to the level it had in December 2023. Although it was a lower rate than the 5.2% of the first half of 2023, The result was a very positive surprise to the AAMF considering the recessionary context of the economy during the first half of the year.
All sectors showed growth, but with quite different expansion rates: Aesthetics and Health was in the lead with 16.7%, followed by Training with 14.6%, Services with 13.8% and much further behind Clothing and Footwear with 5.9%, Commerce with 2.4% and in last place Gastronomy with just 1.4%.
Completing the picture, 37% of brands maintained the same number of POS as in December 2023 and 8% admitted to having reduced their network.
Expectations for the rest of the year are positive
The AAMF survey included questions about expectations for the second half of this year. In this case 88% said they were actively looking to open new franchises and have concrete opening plans for another 379 POS locations or an additional 6.7% growth.
In addition, they raised a goal of reaching 574 openings which, if implemented, would be equivalent to 10.6% growth by the end of the year compared to 2023.
“If these objectives are achieved and assuming an equivalent behavior for the entire universe of franchises, we estimate that By the end of 2024 there would be around 55,000 PDVs of franchising brands in Argentina, including both own and franchised stores,” the report noted.
The impact of the crisis on the level of sectoral activity
Regarding the level of activity during the first half of 2024 46% of companies stated that it grew against the same period of 2023Meanwhile, 41% reported a lower level of activity, and only 13% said they had maintained the same level year-on-year.
Although the number of brands that reported a lower level of activity compared to last year increased (41% in 2024 versus 26% in 2023), the report noted that “this situation not surprising In a context of contraction in consumption due to the significant adjustment of relative market prices, it is encouraging that almost half of the population is showing growth in their level of activity.”
The franchise system is based on the integration of third-party capital to accelerate the growth of recognized brands (franchisors), where franchisees seek a return on their investment with limited risk based on proven business models.
Given the general context of the economy, The report noted that it is encouraging that 42% of the brands surveyed said they are achieving ROI in line with what they had planned. and 15% slightly above what was planned, however, the impact of the recessionary context is noticeable in the increase in brands that are obtaining returns somewhat lower than planned, which was recorded by 43% during the first half of 2024 compared to 26% in 2023.
Positive evolution of job creation
The franchise system is also a generator of skilled employment, necessary to operate the new points of sale. According to this latest survey, 42% said they had increased the number of employees, 37% had kept them the same and only 21% had reduced them..
However, almost all brands are optimistic about the future, as 58% expect to increase their staff during the second half of 2024 and only 4% expect to reduce it.
As for the number of jobs generated by each new POS, the Gastronomy sector continues to lead with an average of 7.5 employees per location, followed by Commerce and Beauty and Health with 4.0; then by Training with 3.3, and Services and Clothing and Footwear close with 2.2 employees per location.
The development of the system inside the country and abroad
The survey also included questions to brands about their development in the different provinces and regions of Argentina. There were 56 of the 76 brands surveyed (73%) that They declared having development in more than one region or province of the country.
The ranking is led by AMBA, since two out of three brands surveyed have a presence in that region, followed by Córdoba with 59%, Litoral/NEA, NOA and Sur with 50%, CUYO with 47% and the interior of the Province of BA with 46% of the brands.
Regarding the challenges of international development, the report highlights: “A well-organized franchise system based on a competitive proposition It is a springboard for the international development of Argentine brands. and thus achieve income in dollars and avoid the ups and downs of the national economy,” the report highlights.
And at this point he points out that of the 74 brands of Argentine origin that participated in the study, 28.4% already have development in other countries with a total of 429 points of salemainly in Uruguay and Paraguay, with 14 and 13 brands respectively that operate 120 POS in each country.
Next is Chile with 7 brands operating 109 POS; Peru with 5 brands and 16 POS; Spain with 4 brands and 12 POS; Bolivia with 3 brands and 28 POS; and finally Brazil, Colombia, Ecuador, the United States and Central America with only one or two brands.
“These numbers show that the Brazilian market, despite its great attractiveness due to its size and proximity, It remains a pending challenge for most Argentine brands with an international vocation.mainly due to the language barrier and the well-known legal and tax complexities of the neighboring country,” the survey adds.
He also found it encouraging that 34% of brands said they have plans to continue their international expansion and 10% to start it.
Based on the survey, the AAMF estimates that there are around 1,800 brands in Argentina that operate with the franchise system, of which 43% are in the Gastronomy sector, 22% in Specialized Commerce, 15% in Services, 10% in Clothing, Textiles and Footwear, 7% in Aesthetics and Health and 5% in Training.
In total they operate a network of about 51,500 POS in Argentina, including their own and franchised ones and They employ around 250,000 people directly.
Source: Ambito
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