Is food franchising in Brazil in crisis?
Over the past eight months, Brazilian consumers have watched some of the world’s best-known food and beverage chains collapse in the domestic market.
Background: Last November, Southrock Capital, a holding company that operates more than 20 brands in the food sector, lost the right to use the Starbucks brand. The American coffee giant terminated the agreement after Southrock failed to comply with its licensing obligations, including paying royalties.
In the same month, South Rock filed for bankruptcy protection after being unable to repay R$1.8 billion (US$327 million) in debt after losing the rights to Starbucks, South Rock’s largest business, which accounted for about R$50 million in annual revenue. Subway and Eataly, also South Rock’s subsidiaries in Brazil, were initially unaffected, while Starbucks, TGI Fridays and Brazil Airport Restaurants (a chain in major airport terminals) were in the process. However, in March, Subway representatives also filed for bankruptcy protection, reporting debts of more than R$482 million. In May, the Commercial Court of São Paulo accepted Subway’s argument to merge both processes, citing the confusion of shares and essential economic dependencies between the South Rock brands.
Why it matters…
