El Salvador - Franchising El Salvador-Franchising
El Salvador began adopting the franchise business model in late 1970s, when McDonald’s and KFC entered the market. Since then the business environment for U.S. franchises has been favorable and Salvadoran consumers have shown clear preference for U.S. franchises over local or other international franchise concepts.
El Salvador is a small and competitive market and overall there are no significant challenges for U.S. franchise firms. There are about 100 local companies operating under international franchise business models. U.S. companies dominate with 75% market share and investment varies from low cost operations up to larger investments, such as hotels.
U.S. franchise systems operate successfully in many segments, including: hotels, car rentals, accounting, fitness, mailing and shipping, real estate, training, and travel. Fast-food franchises and casual dining restaurants have been the most successful, including: Starbucks Coffee Company, Taco Bell, Domino’s Pizza, Red Mango, Denny’s, Ruby Tuesday, TCBY, Olive Garden, Panda Express, and Smashburger.
There is no specific law or government agency that regulates franchise operations or contracts in El Salvador. CAFTA-DR enhanced protection for U.S. brands and trademarks, removed technical barriers for U.S. exports and provided alternative dispute resolutions for U.S. companies doing business in El Salvador.
Trademark laws meet international standards to protect trademarks and distinctive signs. To get full protection, the trademarks must be registered at the Intellectual Property Registry at the National Registry Center.
A highly publicized court case between a prominent U.S. franchisor and its former franchisee suggests that enforcement of franchise contracts in the courts can be difficult. Consequently, we urge franchisors to develop their business plan based on careful analysis of the business bona fides of their potential franchisees.