Peru - FranchisingPeru - Franchising
The franchise sector in Peru includes approximately 473 companies, of which 70% are primarily concentrated in food and beverage services. According to Franquiguía 2017-2018, the Peruvian franchise market is evenly split between Peruvian and foreign ownership with 50% of franchises being foreign-owned. Experts report that the franchising sector has experienced rapid growth over the last 10 years with an estimated annual growth rate of 20%. Shopping Malls continue to be the ideal locations to establish foreign franchises due to the large amount of foot traffic and shoppers. In Peru, there are 85 Shopping Malls (45 within Lima and 40 in provinces), that have surpassed $7 billion in sales with more than 60 million monthly visitors.
Growth in the Peruvian franchising sector can be attributed to the burgeoning middle class and its newfound purchasing power. Due to Peru’s reputation as one of the most gastronomically advanced countries in Latin America, food and beverage services continue to be the most represented among franchises in Peru. In addition, the Peruvian market remains a higly fragmented one—more than 90% of retail businesses are small family-owned enterprises—which leaves vast opportunities for U.S. franchises to expand to Peru. The average Peruvian consumer still views U.S. brands as “aspirational,” meaning that U.S. franchises espouse cultural values that Peruvians relate to. Because of the strength of U.S. brand affinity, there is ample potential for growth of U.S. franchises in Peru.
Although franchises in Peru are subject to general commercial law, general antitrust law, and Decisions 486, 608, and 291 of the Andean Community, there is no specific legislation governing franchising. According to Articles 162 through 164 of Decision 486, a written license agreement must be registered with the Peruvian Government’s Patents and Trademarks Office (INDECOPI). Prospective franchisers must be aware of a 30% income tax on royalties, 18% value added tax (IGV) (paid by the local company), and import tariffs dependent on the type of good. Countries that have signed double taxation agreements with Peru maintain separate regulations for royalties and income tax withholding (the U.S. not included).
The U.S. Commercial Service in Lima, in cooperation with the American Chamber of Commerce – AmCham, and Grupo Nexo Franquicia, founded a Franchise Committee in order to promote and market U.S. franchises in the country. This committee is composed of key investors in the franchise sector in Peru and works with prospective U.S. based franchisors interested in entering the Peruvian market.
In addition to food services, franchise sectors with strong growth potential include:
Growth in the Peruvian franchising sector can be attributed to the burgeoning middle class and its newfound purchasing power. Due to Peru’s reputation as one of the most gastronomically advanced countries in Latin America, food and beverage services continue to be the most represented among franchises in Peru. In addition, the Peruvian market remains a higly fragmented one—more than 90% of retail businesses are small family-owned enterprises—which leaves vast opportunities for U.S. franchises to expand to Peru. The average Peruvian consumer still views U.S. brands as “aspirational,” meaning that U.S. franchises espouse cultural values that Peruvians relate to. Because of the strength of U.S. brand affinity, there is ample potential for growth of U.S. franchises in Peru.
Although franchises in Peru are subject to general commercial law, general antitrust law, and Decisions 486, 608, and 291 of the Andean Community, there is no specific legislation governing franchising. According to Articles 162 through 164 of Decision 486, a written license agreement must be registered with the Peruvian Government’s Patents and Trademarks Office (INDECOPI). Prospective franchisers must be aware of a 30% income tax on royalties, 18% value added tax (IGV) (paid by the local company), and import tariffs dependent on the type of good. Countries that have signed double taxation agreements with Peru maintain separate regulations for royalties and income tax withholding (the U.S. not included).
The U.S. Commercial Service in Lima, in cooperation with the American Chamber of Commerce – AmCham, and Grupo Nexo Franquicia, founded a Franchise Committee in order to promote and market U.S. franchises in the country. This committee is composed of key investors in the franchise sector in Peru and works with prospective U.S. based franchisors interested in entering the Peruvian market.
In addition to food services, franchise sectors with strong growth potential include:
- Aesthetics, beauty and health (beauty salons, spas, salons, gyms, etc.)
- Clothing and accessories (clothing, footwear, jewelry, accessories, gifts, etc.)
- Specialized services (entertainment, leisure, playgrounds, etc.)
- Education (universities, colleges, etc.)