MEXICO CITY (Reuters) – Grupo Carrefour Brasil on Wednesday launched a franchise model of convenience stores in the Brazilian market, aiming to leverage its know-how from years of experience in Europe, a top executive said.
Joao Edson Gravata, executive director of Carrefour Brasil, said the franchise formula would put Carrefour in a stronger position to compete.
The convenience segment, which consists mainly of large chain stores, is relatively new in Brazil, says Gravata. “We are part of this context, we have an important presence and we want to expand it.”
The company conducted years of planning and studies in the Latin American region and the Carrefour Express franchise model will be implemented initially in Sao Paulo, Brazil’s richest city, and later in other cities.
In return for an initial investment of 150,000 reais ($30,893.44), Carrefour will offer its franchisees know-how in any store format they choose to develop, it said in a statement.
Those stores would be in addition to the Brazilian company’s 152 existing Carrefour Express stores.
The model should allow the company to grow faster without making large investments, retail and franchise analysts said.
“The (franchise model) allows (companies) to open new fronts, with different point-of-sale formats,” says Professor Pedro Melo of the Pontifical Catholic University of Sao Paulo (PUC-SP).
At the same time, the business model is not without risks.
“A lot of effort goes into selecting the franchisee, the franchisee’s commitment to actually being at the forefront of the store’s operation, and (a lot of) training and qualification,” said retail consultant Alberto Serrentino.
Gravata said the franchisees will benefit from an extensive menu of expertise and tools. Carrefour had about 1,900 franchised stores across Europe in December.
About a year ago, Grupo Nos, a venture between Brazilian energy company Raizen and Mexican retailer Femsa, launched its first Oxxo convenience stores. Those outlets, which numbered 314 at the end of the first quarter, are owned and operated by the company, rather than franchised.
Franchises of Grupo Ultra’s AM-PM stores — located in gas stations — lead Brazil’s convenience sector with more than 1,800 stores, according to Melo.
Other competitors, operating through a mix of proprietary and franchise formats, include Grupo Pao de Acucar’s Minuto Extra and Minuto Pao de Acucar, Grupo Carrefour Brasil, Dia and Hirota, another local brand.
($1 = 4.8554 reais)
Reporting by Carolina Pulice; edited by Grant McCool