Ecuador - Country Commercial Guide
Franchising
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Overview 

The franchising model is widely accepted in Ecuador as it has proven to be a successful one.  Familiarity with the United States and its brands generate a constant demand for U.S. franchises.  The dollarized Ecuadorian economy makes it simple to send royalties back to the United States without the concern of currency depreciation.  The franchising model generates employment and helps the local economy, representing approximately $1.5 billion per year and over 10,000 in direct jobs. U.S. brands have approximately 60 percent market share in the franchising industry.  Food and beverages account for 50 percent of the franchising market and the other 50 percent represents services (hotel chains, entertainment, education, and others). In the food and beverage franchise sector, around 90 percent of the brands are from U.S.-origin.

One of the challenges of this sector is that Ecuador’s protectionist policies lead to local sourcing requirements.  The Ecuadorian government regulates imports, making it difficult to source elsewhere.  Most franchises have been successful in sourcing locally and securing their supply chain.  Labor and tax burdens are also challenging. 

Registering the franchise brand is important, even if a franchisee is not yet chosen.  Frequent regulatory changes that directly affect franchise operations are common.  For example, labor laws and taxation undergo regular changes.  There is a 3.5 percent capital exit tax that franchisees must pay when sending royalty payments back the United States. 

 Table 1: Number of Franchised Brands in Ecuador

 2020202120222023 estimated
Total Local Production 30404550
Total Exports     
Total Imports 80828891
Imports from the US 47485154
Total Market Size 110122133141
Exchange Rates     

(total market size = (total local production + imports) - exports) 
Source: The Ecuadorian Association of Franchises 

Leading Sub-Sectors 

  • Elderly services/care 
  • Education: online, at-home tutoring 
  • Home delivery services
  • Technology: online shopping platforms, E-commerce, content for social media, big data analysis, eSports 
  • Automation (contactless) 
  • Geo targeting for marketing/advertising 
  • Location-based entertainment
  • Hotels
  • Food & Beverage

Opportunities 

U.S. brands are leaders in the franchising sector.  Every year, large delegations of Ecuadorian investors travel to the International Franchise Expo in New York City looking for franchising opportunities.  Although the food and beverage sub-sector is a mature market, there are still opportunities in services.  Potential franchisee candidates include predominant economic groups in the country with experience in franchising, corporations that want to diversify their portfolio, and entrepreneurs.  

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