The Future of Costa Rica’s Franchise Industry
While Costa Rica is a small market relative to other Central American countries, it presents U.S. franchise companies with one of the fastest-growing markets in the region. According to the Chamber of Commerce of Costa Rica (CCCR), the country is host to more than 355 registered franchises with 81% from international brands. The three main types of franchises in Costa Rica come from the fashion and clothing (32%), food (24%), and hotel (14%) industries.
U.S. franchises are well-received in the industry and represent 34% of all franchises in the country. With a proven track record and receptivity in the local market due to geographical proximity and cultural similarities, U.S. franchises are poised to continue their already strong track record. While a mature market there is an opportunity for growth and expansion due to a desire for more U.S. products and services. However, success is largely dependent on effective marketing in which cultural sensitivities must be recognized.
Due to Costa Rica’s size, investors usually extend exclusive territorial contracts to the franchisors unless they are faced with an investment group with regional reach. In many cases, a local franchisee owns several types of franchises in different sectors. The Central American Free Trade Agreement (CAFTA-DR) is instrumental to give full market access to franchises, with improved trademark protection, lower costs to export equipment, and elimination of “dealer acts”.
The franchising sector enjoys the same legal rights as any other business operating in Costa Rica and the Central American Free Trade Agreement (CAFTA-DR) was instrumental in providing full market access to U.S. franchises by providing improved trademark protections, lower costs to export equipment, and the elimination of “dealer acts”. There is no specific legal framework that regulates the industry; therefore, franchises operate under the same commercial laws as any other business. Agreements between the franchisor and franchisee are established via private agreements, and arbitration is the most common way to solve disputes.
For more information on the franchising market in Costa Rica, and to discuss business opportunities for your franchise, please contact Emilio Cordoba.