With the majority of franchise concepts in El Salvador originating in the U.S., it’s easy to see why western brands turn to this country’s familiar market.
Words by Kieran McLoone, deputy editor for Global Franchise
EL SALVADOR IN NUMBERS
• Population: 6.48 million
• Capital city: San Salvador
• GDP: $24.7bn
• Language: Spanish
• Area: 21,040 square kilometers
• Currency: U.S. Dollar ($)
Of all the countries that international franchisors could penetrate in Central America, El Salvador seems like the most natural entry point. After all, the U.S. dominates the country’s franchise industry with a 75 per cent market share, and franchising was only introduced to El Salvador because of brands like McDonald’s and KFC entering the market in the late 1970s.
Since then, countless American staples have found success within the modest country, including the likes of Domino’s Pizza, Denny’s, Olive Garden, Panda Express, and Taco Bell.
It isn’t just the brands that operate within El Salvador that give it a distinctly U.S. slant. The country uses the U.S. dollar as its form of currency, and this dollarized economy eliminates the foreign exchange rate risks that come with both other parts of Central America and the wider global business landscape.
Additionally, president Bukele, who entered office back in June 2019, has been consistent with his messaging to promote the international possibilities available within El Salvador. His approach is one of convenient trade, and he has continuously stated that the country is “open for business”; especially for prominent U.S. brands. This means that while it’s still the most established brands that will find it easiest to partner with domestic franchisees, even strong emerging concepts could enjoy success within El Salvador’s welcoming borders.
“While it’s still the most established brands that will find it easiest to partner with domestic franchisees, even strong emerging concepts could enjoy success within El Salvador’s welcoming borders”
The challenges associated with franchising in El Salvador aren’t as immediate as some other Central American markets, but there’s still ample considerations that incoming brands will need to make. On the World Bank Group’s Ease of Doing Business Ranking, for example, the country comes in at 91st – just over halfway down the list. It manages to score highly in aspects like getting credit and the processes of starting a business but falls down in areas like enforcing contracts and protecting minority investments.
Because of this, it’s crucial that you do your homework before entering the country; even more so than in other global markets. Anybody can start a business in El Salvador, but it takes truly savvy franchisors to safeguard it for the long-term.