Although the Portuguese economy is currently experiencing an economic slowdown, the Portuguese franchise market continues to grow. The Portuguese continue to be very receptive to new innovative concepts in franchising and there is a high demand new franchises in Portugal. Existing and prospective master franchisees continue to expand. At present there are 470 franchisors operating in the market and the number of franchised units is estimated to be 12,016. Currently, Portuguese franchisors represent 59 percent of the total market share, followed by Spain with 15 percent, the U.S. with 8 percent and France with 3 percent.
Even though Portugal’s greatest concentration of franchises is in the services area with 53.7 percent of the market share, there is still an excellent opportunity for U.S. franchisers. The market is still not yet fully developed and Portuguese consumers are now looking for various service providers, which may improve their quality of life. The market trend for services in the next few years shows a greater emphasis on quality and U.S. firms should consider Portugal as a target market. The quality of a service is very important to Portuguese consumers and they are willing to pay a higher price for comfort and status.
The Portuguese are very receptive to franchising and the general attitude in Portugal towards franchising is very positive. Overall, the service franchise sector is not yet saturated and is, therefore, an excellent market for U.S. franchises, even though this sector has grown considerably in the last decade. From a U.S. perspective, there are many aspects of life in Portugal that are expensive and inconvenient, which could be energized with American franchising concepts. There are many U.S. franchise concepts that are seen in many other parts of Europe, but are absent in Portugal, such as educational entertainment, outdoor theme parks. Also, Portugal relies on tourism and seeks to develop the country as a tourist destination. There’s very little U.S. presence in this area.
Because Portugal is a relatively small country, the business service niche has yet developed. Portugal is a country accustomed to functioning on personal contacts. Therefore, U.S. companies need to take the time to develop personal ties with a potential Portuguese partner to be successful. According to industry surveys, both consistent high product quality and the availability of accompanying services are crucial for a concept’s success.
Franchised businesses in 2010 generated 73,143 jobs, accounting for a share of 3.1% of the GDP. Total sales volume accounted for $ 5.4 billion .
Currently, Portuguese franchises represent 59% of the total the Portugal market share, followed by Spain, with 15%, the U.S. with 8%, and France with 3%. Spain has a major advantage due to its proximity and Spanish franchisors are very proactive and aggressive in their expansion.
There are 45 U.S. franchises operating in Portugal. Re/Max is the largest U.S. franchise, operating in Portugal with 185 units. The estimated annual growth for all U.S. franchises is expected to exceed 4 percent over the next three years.
In general, foreign-owned franchises play an important role in Portugal with 41 percent of the total market share. Some sectors are dominated by concepts from specific countries, i.e. the fast food/restaurant and the real estate sector by well-established U.S. flagships (McDonald’s, Pizza Hut/ Re/Max, Era Portugal); the clothing sector by Spanish brands (Zara, El Corte Ingles, Cortefiel), while the coffee scene is dominated by Italian brands (Segafredo, Lavazza).
European firms generally have a longer history in the Portuguese market and the fact that they are geographically closer, U.S. marketing techniques must be well planned, aggressive and flexible. The U.S. franchisor should consider existing competition and in this regard, the franchise fee is important. U.S. companies need to be flexible with initial fees, financial terms and in many cases adapt to the existing market conditions. The financial sector is now better aware and interested in financing the specific needs of this segment of the economy.