Why Peru? Gold Bench or Golden Franchise Opportunity?

Today Peru is not only a possibility, but an opportunity, a gold bench on which we do not want to sit anymore.

By Fernando López De Castilla

According to an old saying, Peruvians are like beggars sitting on a gold bench. Beyond the Inca Empire and its legends of lost cities rich in gold, prior to the Spanish conquest, and the country’s natural resources in industries such as mining and fisheries, the truth is that we continue to be sitting on that bench and very few people realize that.  

Today Latin America is a region that shows a vibrant economy with a GDP growing more than 5 percent per year and an emerging middle class made up of 200 million people with liquidity surplus and insatiable consumerism, highly aspirational and in search of new consumer experiences.  

Now the region is quickly bridging the 1/10 gap in market indicators vs. more developed economies, and its franchise market, which includes approximately 5,500 brands, has been recording a growth rate of over 30 percent per year, while the retail industry has been growing over 20 percent per year over the last decade. And Peru is the crown jewel amidst this whirlwind of opportunities, the gateway to what is still a
new world.  

Record foreign investment, infrastructure development 

In its 2015 Ease of Doing Business Ranking, the World Bank placed Peru 35th in the world and second in the region, even above nations with huge economies such as Mexico’s, and historically more developed societies such as Chile’s. Between 2003 and 2013, Peru’s GDP recorded a 6.7 percent growth rate per year, higher than the regional average, and amidst unprecedented economic, judicial, political and market stability that skyrocketed global investor confidence and set a foreign investment and infrastructure development record.  

In particular, in those 10 years, private investment recorded a five-fold increase, while foreign direct investment reached US $10 billion. This new era of growth led the International Monetary Fund to call Peru a “rising star,” a strong-growth, low-risk emerging market in the middle of monetary and tax policies that drove the country to one of the lowest debt ratios in two decades, 19.2 percent of its GDP, and placed it second in terms of net international reserves, with US $63 billion in October 2014.  

Cultural wealth, hospitality, sophisticated cuisine 

But not everything has to do with indicators and ratios. UNESCO listed 11 tourism attractions in Peru as world cultural and natural heritage sites, and INMARK, the Spanish consulting firm, selected Peru as the most authentic destination in Latin America, for its cultural wealth and the hospitality of its people.  

On top of that, the World Travel Awards presented Peruvian gastronomy with South Americas Leading Culinary Destination Award in 2014, thanks to the fantastic work carried out by renowned chefs such as Gastón Acurio and Diego Muñoz, who placed Peruvian cuisine on a par with the most sophisticated cuisines worldwide. Even the prestigious magazine The Economist recognized Peruvian gastronomy as one of the world’s 10 top cuisines.  

Decades of franchise growth 

Beyond tourism and the gastronomic attractions the country has to offer, in this period, Peru has not only built a reputation, but a world-class export supply and unique brands with a franchise system that is conquering the world. There are about 150 local franchises in the country, mostly within the industries in which Perú has fundamental strengths and a clear global potential, like food and beverage, and apparel.  

It is also important to highlight the role and impact that the first wave of global franchises had on Peru and Latin American over three decades ago. I mean fast-food franchises such as KFC, Pizza Hut and Burger King, and then others such as Domino’s Pizza, Taco Bell, McDonald’s and Subway, and casual dining brands such as Chili’s and TGI Friday’s. 

A new wave of global franchises entered the market one decade ago with brands such as Starbucks, Papa John’s, Dunkin Donuts, Pinkberry and Popeye’s, as well as Wendy’s and Hard Rock Café. 

Innovative concepts such as Which Wich and legendary brands such as Bennigan’s are now entering the market, rejuvenating the face of the American food and beverage industry, but the services sector has also bet on the region with powerful proposals such as FASTSIGNS and 9Round. And we cannot fail to mention irresistible retail brands such as Victoria’s Secret and Forever 21.  

This new wave of global franchises will certainly make people talk and redefine the consumer behavior imposed by their predecessors a long time ago. Of course, we cannot forget the European franchises, which have already set their eyes on the region, or the Asian ones, which are already studying us from afar. Today’s Peru will continue to change, decade after decade, from the hand of fabulous concepts and immortal brands that boost the economies and move the hearts. 

Future growth projected 

The company I represent, Grupo Nexo Franquicia, made a fascinating discovery upon conducting a study in a dozen Latin American countries two years ago. It found that a brand that was growing at regional level through the franchise system had an average of 40 franchised units in each country in the region. In this sense, it spotted the presence of Peru, with an average of 10 units per brand, among countries that were approaching 70 units per brand such as Mexico, and others that exceeded the regional average such as Argentina and Venezuela. Namely our study revealed that the country where our parent company was headquartered could grow 10 times more in the franchise industry, and would still be at an average level compared to the region.  

Upon matching such opportunity to a passion for life and an unparalleledenterprising culture arises a possibility, a question answered with a convincing why that lifts us from our “frog pond” to excellence and to the highest qualities human beings have and can offer, as Aristotle once said.  

Today Peru is not only a possibility, but an opportunity, a gold bench on which we do not want to sit anymore, but which we intend to exploit, in order to benefit the new generations and what we can take to every corner of the world such as our gastronomy and textiles. I think this is where the idiosyncrasy and values of a nation and each of its inhabitants lie, making them proud and pushing them to go on and never backing down under any circumstance, because the future implies looking ahead, the only direction on which we Peruvians want to set our sights. 

Fernando López de Castilla is founding partner of Grupo Nexo Franquicia. Find him at fransocial.franchise.org.