President Obama moved on Wednesday to restore diplomatic relations with Cuba after 54 years. People didn’t need long to begin speculating that McDonald’s would soon populate the island nation with tons of restaurants.
Just as Obama announced the move, the Twittersphere erupted with lamentations of McDonald’s locating on every street corner. The conversation ultimately evolved into speculation that brands like Starbucks or Taco Bell or Chick fil A or Pizza Hut would all set up shop now that U.S. trade can begin there again.
And, indeed some franchises are considering just that. According to the Associated Press, the California-based chain Fatburger has been thinking of Cuba for four years and could take six months to a year to open a location there once it gets the go-ahead.
Cuba could appear to be a logical step for some restaurant brands. After all, Cuba has 11 million people, and those 11 million people currently don’t have access to a Big Mac or a Venti Latte. Burger King, McDonald’s and many other U.S. brands already have large-scale franchisees that do well in Latin American countries and the Caribbean.
But opening franchises in Cuba won’t be easy. For one thing, it would take an act of Congress to fully restore commerce between the two countries, and there is some vehement opposition to doing so among Congressional leaders.
In addition, while Cuba’s food supply could enjoy a boost with the reopening of trade between the two countries, much would have to be worked out between them before Cubans could get a Whopper.
And even then, it could take a while for chains to establish residency.
“The opening is going to come a little more cautious than everybody expects,” said Charlie Weeks, a consultant who helps take franchise brands into international markets. “I see it as coming a little bit down the road. It’s going to be inspired more by companies that are of a dynamic that can go in there and have a great deal of clout in the country to begin with.”
Pros and cons
Cuba’s population is roughly the size of Ohio. It also has a per-capita GDP of only about $6,000, according to the World Bank. By comparison, Puerto Rico has $28,500. The U.S.: $53,000. “They don’t have a booming private sector,” Weeks said.
There’s also the matter of the Cuban government, which remains a communist dictatorship that exerts considerable control over the population. Indeed, chains like McDonald’s could be kept from developing a presence in Cuba because the government there might be more interested in developing industries that could help the country’s production.
That said, restaurant brands have not shied away from communist nations, with many opening units in China.
Weeks does believe that companies like Yum Brands or McDonald’s would be more likely than a small brand to develop in Cuba, because they have the clout and the international experience.
In addition, he said, development in that country would likely require significant investment, and it would take some time for that investment to pay off. “You don’t want to be a small firm to learn these countries,” Weeks said.
Cuba does have its advantages. It already has a strong tourism industry even though Americans can’t easily visit there. Canadians flock to the Cuba, for instance, and they tend to provide glowing reviews of the country’s beauty.
Weeks said the country has other intriguing benefits, noting that the population has good health conditions and is relatively well educated. He also believes that, following 50 years of isolation and severe trade restrictions, the people of Cuba have learned how to adapt and improvise.
“There’s a lot of ingenuity there, I’m sure,” Weeks said. “Whenever you don’t have an auto industry, you have to keep improvising to keep cars on the road. They’re going to be quick learners. So you may have a market that will start up pretty quickly.”
Contact Jonathan Maze at [email protected].
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