Carrefour Brasil bets on know-how to expand small stores operation

By Carolina Pulice

MEXICO CITY (Reuters) – Grupo Carrefour (EPA:) Brasil launched a franchise model of convenience stores in the Brazilian market on Wednesday, aiming to tap into its know-how from years of experience in Europe, a top executive said.

Carrefour Brasil’s convenience executive director Joao Edson Gravata said that the franchise format would put Carrefour in a stronger position to take on competitors.

The convenience segment, which is mainly in stores operated by large chains, is relatively new in Brazil, Gravata said. “We are part of this context, we have an important presence, and we want to expand it.”

The company carried out years of planning and studies in the Latin American region and the Carrefour Express franchise model will be initially implemented in Sao Paulo, Brazil’s wealthiest 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 whichever store size format they opt to develop, it said in a statement.

Those stores would supplement its 152 existing Brazilian company-owned Carrefour Express format stores.

The model should allow the company to grow faster without making big investments, retail and franchise analysts said.

“The (franchise model) enables (companies) to open new fronts, with different point of sale formats,” said Professor Pedro Melo from Pontifical Catholic University from Sao Paulo (PUC-SP).

At the same time, the business model is not without risks.

“There has to be a strong effort to select the franchisee, the commitment of the franchisee to actually be 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 ample menu of expertise and tools. Carrefour had some 1,900 franchised stores across Europe as of December.

About a year ago Grupo Nos, a venture between Brazilian energy firm Raizen and Mexican retailer Femsa, launched its first Oxxo-branded convenience stores. Those outlets, which numbered 314 by the end of the first quarter, are company-owned and operated, rather than franchised.

Franchises of Grupo Ultra’s AM-PM stores – located in gas stations – lead the convenience sector in Brazil with more than 1,800 stores, according to Melo.

Other competitors, operating through a mix of company-owned 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)