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Central America focus: Guatemala – Central America’s largest franchise market

Central America focus: Guatemala – Central America’s largest franchise market

Despite economic disparity, Guatemala has been a franchising hotbed for half a century.

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Words by Kieran McLoone, deputy editor for Global Franchise

GUATEMALA IN NUMBERS

• Population: 17.9 million
• Capital city: Guatemala City
• GDP: $82bn
• Language: Spanish
• Area: 108,890 square kilometers
• Currency: Quetzal (Q)

Guatemala was originally the site of the ancient Mayan civilization and now is known as one of the more understated, yet highly attractive, franchise markets within the Central American region.

International franchising first took hold in Guatemala in 1969, when Pizza Hut became the first U.S. chain to open up in the country. Fast food still remains the most popular segment of the market, too, with a 43 per cent market share. This is followed shortly by services at 33 per cent, and a little further behind, retail at 11 per cent.

Because of its size, density, and financial output, Guatemala is known as the largest franchise market in Central America. 80 per cent of the brands that operate in the country are of foreign origin, and just over half of that figure (45 per cent) come from the U.S.

This includes franchising mainstays like McDonald’s, which was first brought to Guatemala in 1974 by entrepreneur José María Cofiño. McDonald’s Guatemala has always proven a real success story for the golden arches, and Guatemala’s arm of McDonald’s is credited with coining the concept of the Happy Meal, as well as being one of the primary test sites for the McCafe brand upon its initial launch.

“Local entrepreneurs willing to invest in a franchise will only do so if the concept in question has a strong foundation in its home country”

Politically, Guatemala hasn’t always been a stable market for brands to enter, but the signing of peace accords in 1996 ended 36 years of civil war in the country and removed a major obstacle for foreign investment. The impact of this move was seen a few years later, with the Guatemalan Franchise Association reporting a 1,500 per cent growth in the market between 2002 and 2007.

However, there are still some major social and economic barriers that could impede the growth potential of some international brands. For example, while Guatemala accounts for over a third of Central America’s total GDP, the country still possesses high rates of inequality and disparity among its youthful population. This can make finding the right kind of investor tricky and means that local entrepreneurs willing to invest in a franchise will only do so if the concept in question has a strong foundation in its home country. Emerging brands could struggle.

For franchises that meet local criteria, though, Guatemala is a truly enticing opportunity. 70 per cent of the country’s population is under 30 years old, with many citizens speaking English alongside the local Spanish language. And as with many markets south of the border, Guatemala’s close proximity to the U.S. means that brand awareness is rife.

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