Discusses opportunities for U.S. franchisers and legal requirements in the market.
Last Published: 10/9/2019

The number of franchises in Colombia has more than doubled over the past ten years. After Brazil, Mexico, and Argentina, Colombia has the 4th largest number of franchises in Latin America. This boom has been driven by a better understanding and acceptance of the concept of franchising by many local firms, and by the improvement in international perception of the business environment due to the implementation of newly-signed free trade agreements.

After a pilot project of the Inter-American Development Bank (IDB) and ten Colombian Chambers of Commerce to foster the development of franchising from 2006 through 2009, an ever-growing number of companies have adopted franchising as a safe and less complex way of expanding their business.

International concepts have increased vis-a-vis national franchising concepts, with the former taking up 52 percent of the total share of businesses in 2014, with 48 percent of franchise concepts being Colombian. The breakdown by country of origin of international franchises in Colombia has the United States at the lead, with 23 percent of the total. Next come European countries such as Spain (8 percent), Italy (5 percent), England (3 percent) and France (3 percent); as well as a few Latin American countries such as Argentina (2 percent) and Brazil (2 percent).

According to Colfranquicias, the service sector, particularly the hospitality, health, and beauty industries, offers significant opportunity for growth. The restaurant and retail sectors have benefitted from policy reforms and continue to grow steadily. Franchising in the fashion industry grew 7% from 2015 to 2016, with the entrance of many Spanish brands contributing to this growth. The franchises currently with the biggest growth in Colombia are BodyBrite, Subway, Sandwich Qbano, Efecty Servientrega, and Prontowash.
Franchises are concentrated in the major cities of Bogota (50%), Medellin (12%), Cali (6%), Barranquilla (4%), and Bucaramanga (3%). The smaller cities of Barranquilla, Cartagena, Bucaramanga, Armenia, Manizales, and Pereira offer opportunities for growth.

The concept of franchising in Colombia has yet to obtain the same degree of development as it has in developed  countries such as the United States. However, Colombia is currently dealing with significant changes in the economy; the drop of oil prices since 2015 has strongly influenced the Colombian peso devaluation.  The following U.S. franchises: T.G.I. Fridays, Taco Bell, Krisky Kreme, and Chilli’s closed operations in either 2018 or the beginning of 2019. 

Over the last decade, Colombia’s GDP per capita increased from just over $6,000 in 2000 to $7,700 by 2018. It is also estimated that the middle class grew from approximately 15 percent of the population in 2002 to 31 percent in 2017. This amounts to almost 15 million people out of Colombia’s total 49 million inhabitants. It is estimated that only 3 percent of the Colombian population is in the high-income bracket, which explains why Colombia, like many other Latin American markets, is a very price sensitive market. Familiarity with international franchising concepts remains closely correlated with income bracket, with only the higher brackets being familiar with newer and more novel concepts. Still, while the group with stronger purchasing power is more likely to adopt foreign concepts, some franchising concepts have demonstrated how they can quickly gain market appeal in the lower demographics by offering good products with interesting discounts.

In terms of intellectual property, Colombia has in place adequate institutions to guarantee the rights of companies that have been diligent in the registry of their brands and other intellectual property. There are no specific regulations pertaining specifically to the enforcement of franchising activities and agreements, which are regulated by Commercial Law and treated as “mercantile contracts” (Contrato Mercantil).

As Colombia’s economy is expected to continue growing at a stable and dynamic rate, it is very likely that franchising will continue to develop, both in terms of national and foreign concepts. Furthermore, with the increase in the development of new shopping centers in primary and intermediate cities, growth is likely to benefit both established and up and coming players.

In terms of outlook by franchising category, food and beverages will continue to benefit the most from current economic trends, followed by clothing retail concepts. Services franchises are just starting to gain traction and have yet to become an attractive business opportunity for most investors, with the largest share found in the specialized services health and education and training categories.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.