OS X El Captain - Terminal shortcut is not working
This is because the shortcut you created is specific to the Application.
When you create the shortcut, you need to enter the &quot;exact name of the menu command&quot; within the Application specified in the dropdown above.

Typing &quot;Terminal&quot; won't work.

3 Options to quickly Launch Terminal
Add to your Dock
Open Your Applications Folder and simply drag the Terminal icon to your dock.  Click on it whenever you want.


Use Spotlight
One of my favorite ways to launch programs is to simply type it in Spotlight.  Press Command Space to invoke Spotlight and just start typing


Use Karabiner
If you have to have a keyboard shortcut to run Terminal, consider using  Karabiner.  It's free software that allows you create custom shortcuts for virtually any task.  Best of all, it's free.