FAQ’s

Among the most important trends in franchising today are the internationalization of franchising, the emergence of women and minorities in franchising, and the increased use of technology.  All of these have profound and positive effects on franchising and make it an even more dynamic method of doing business today.

International Franchising

• Franchised businesses continue to grow in all corners of the world.  Domestic franchisors in many countries are increasingly establishing franchises across borders.  More than 400 U.S. franchise systems operate internationally.   International franchising has been successful because consumers around the world recognize famous brands as symbols of quality, consistency, service, and value.
• If you are considering the purchase of a franchise, you may want to not limit the scope of your search to franchisors in your home country.  Increasingly, franchisors are seeking franchisees internationally, and a foreign-based franchisor may provide you with the franchised opportunity you are seeking.
• In many cases, foreign-based franchisors offer individual franchises to operate a single unit.  They also often offer development rights to operate multiple units and “master franchise” rights.  The latter is, essentially, an opportunity to be the “franchisor” for the foreign-based concept in your country or a portion of your country.
• Of course, international franchising presents some different challenges than domestic franchising.  For example, if goods will come from overseas, you may need to be aware of various duties, tariffs, and transportation requirements.  You also need to consider language and cultural differences.  For instance, if you are a franchisee in a different country from the franchisor’s home office, the franchisor’s system may need to be modified for use in your country.

Minorities and Women in Franchising

• Increasing numbers of minorities and women are discovering that franchising can be a good opportunity for everybody.  While franchising is not a panacea, it provides a means for mitigating the traditional obstacles that otherwise competent and capable small investors, particularly women and minorities, face: lack of business experience and capital.  Franchisors provide managerial training and assistance on an on-going basis and, in some cases, arrange for property leases, provide equipment financing and sale-leaseback programs, and assist franchisees in obtaining financing.
• As a result of a strong economy, women are increasingly in leadership positions in franchising whether through establishing new companies, becoming single and multi-unit franchisees, or having high-level positions at corporate headquarters.
• According to the Center for Women’s Business Research, as of 2004, there are an estimated 10.6 million privately-held, 50% or more women-owned firms in the U.S., accounting for nearly half (47.7%) of all privately-held firms in the country.  These firms employ 19.1 million people, and generate $2.46 trillion in sales.
• As the population of minorities in the U.S. population continues to rise, minority franchising in cities is expected to rise.
• IFA’s Minorities in Franchising Committee and the IFA Educational Foundation’s Diversity Institute provides research, education, and outreach programs to expand the opportunities for minorities in franchising.
• IFA’s Women’s Franchise Committee (WFC) is dedicated to inspiring and encouraging women in franchising by creating a network of business professionals dedicated to strengthening the success of women in franchising.  The WFC has created a number of programs and resources in order to achieve this goal, ranging from “how to” guides and conferences to local networking chapters.

Technology and Franchising

There are several trends related to the use of technology in franchising today.  First, many franchisors use the internet to communicate with franchise owners and suppliers through secure extranets in order to share critical information, facilitate discussion among the franchise network, post operations manuals and updates, disseminate news about ad campaigns, engage in supply chain management, and gather sales reports automatically and without the need for more labor-intensive data entry.  Second, franchisors use the internet to advertise their network to customers.  Third, some franchisors use the internet to engage in business-to-consumer (B2C) e-commerce, often with the involvement of franchisees.  Fourth, many prospective franchisees glean information and make contact with franchisors using the internet.  Some franchisors now report that they get more sales leads from the internet than from any other source.  Fifth, some franchisors have started providing disclosures to prospective franchisees by electronic means.  Sixth, and finally, franchisors make extensive use of technology in offering their services directly to consumers — such as networks of businesses that offer website design and web hosting.  The prospects for, and reality of, involving technology in franchising make this a very exciting time to own a franchised business

The increasingly mobile American consumer has come to depend on and appreciate the consistent quality of franchised products and services. Today, no matter where they go, people expect and want the same quality, which is why consumers so often stop at franchised establishments. The ability to easily recognize a franchised store, restaurant or hotel from the outside guarantees there will be no surprises or disappointments on the inside. Quite simply, the public knows what to expect and likes it that way.

Virtually every business form you can imagine, the International Franchise Association now lists more than 75 different categories to describe its members. Typically, you would think of fast food and restaurants first when thinking of franchising, but franchising covers the spectrum from almost A to Z, from advertising/direct mail to construction to dating services to home inspection to security systems to video sales and rentals. Printing and copying services, maid services, computer services, cleaners, lawn care services, real estate, hotels and motels, and travel agencies are excellent examples of successfully applying franchising to established industries.

As the economy becomes more service and technology oriented, as more women enter the work force, and as a larger percentage of the population grows older, growth areas in franchising are responding to these changes. The industry categories in franchising that are expected to continue to experience rapid growth for the start of the new century are service-related fields such as home repair and remodeling, carpet cleaning, household furnishings, and various other maintenance and cleaning services; business support services including accounting, mail processing, advertising services, package wrapping and shipping, personnel and temporary help services, and printing and copying services; automotive repairs and services such as quick-lube and tune-up; and other areas such as environmental services, hair salons, health aids and services, computers, clothing, children’s services, educational products and services, and telecommunications services.

While it is important to consider industry growth before investing in a franchise, it is more important to analyze an individual franchise company’s track record, keeping in mind that quick growth does not always spell success. A franchise organization that grows too quickly might not have a service team in place to support all of the units properly. Overall, long range trends indicate a steady, solid growth in business format franchising. Some will fall by the wayside, as is natural with any business, but others may well be the “household name” franchise success stories of tomorrow.

In business format franchising, the franchisor prescribes for the franchisee a complete plan, or format, for managing and operating the establishment. The plan provides step-by-step procedures for major aspects of the business and, anticipating most management problems, provides a complete matrix for management decisions confronted by the franchisees. The major advantage of buying a business format franchise is that the “system,” the means for distributing goods and or services, has been developed, tested, and associated with the trademark. As a result, rapid expansion of a successful retail concept can occur more quickly than through company-owned expansion.

Sales by business format franchisors continued to increase steadily throughout the 1990s and into the 21st century. In 2001, comparing business format franchising to product distribution franchising, business format franchising had about 4.3 times as many establishments, employed 4 times as many workers, generated 2.5 times the payroll, and produced nearly 3 times as much output.

Those who have never started their own business, a franchise gives a carefully structured business format, training, and support from an experienced source. If you are not sure you’re ready to start a new business but want to strike out on your own, a franchise may be the answer for you.

Those who have strong financial resources. Since buying a new franchise is much like starting your own business, in addition to having to pay the franchise fees, you will probably experience negative cash flows for the first few months. You should have the financial resources to make it through those months. Alternatively, buying a franchise that’s already established is much like buying a business and can have established cash flows already in place.

Franchising is a method of doing business by which a franchisee is granted the right to engage in business under a marketing plan or system prescribed and controlled substantially or in part by a franchisor and to make substantial use of the franchisor’s trademark, name, logos, or advertising.

The benefit of buying a franchise is that much of the work has been done for you. Generally, you are given the product or service ready to sell. Often, the equipment, systems, policies, and procedures have all been laid out by the franchisor. The raw materials you need to produce your product or service is often available from the franchisor.

Buying a franchise is less risky than starting a business from scratch, since the franchisor has experienced (usually many times over) the pain of getting started. You bring your cash and hard work, and the franchisor will lay out the road-map to success. The cash requirements and total outlays vary greatly but must be disclosed by the franchisor.

Generally, a dispute between a franchisee and a franchisor involves one of a few common issues. The seven issues relate to termination of the franchisee and enforcement of the post-term obligations, statutory compliance issues, fraudulent practices, intellectual property matters, territorial encroachment and general contract disputes. Many termination cases are brought by the franchisee in response to an improper termination of the franchise by the franchisor. Disputes arising from the franchisor’s failure to comply with disclosure are common. Also common are claims brought by the franchisee alleging fraud and misrepresentation by the franchisor, including fraudulent statements made by the franchisor relating to the franchisee’s potential earnings. Often, other disputes center around the franchisor’s failure to comply with the franchise agreement in that the franchisor encroached on the franchisee’s territory, failed to provide ongoing training and support or failed to comply with a number of other requirements imposed by the franchise agreement.

Franchising is a method of expanding a business where the franchisor licenses its trademark and business system to a franchise in exchange for payment to the franchisor for the right to operate the franchise using the business system and trademark. You then conduct your business in accordance with the franchisor’s standards and specifications. Along with the right to use the franchisor’s trademark and business system, franchisors will typically provide franchisees with pre-opening training, post-opening training and overall support.

There is no law, rule or prohibition preventing franchisors and franchisees from negotiating the terms of a franchise agreement. Franchisors will often say the franchise agreement is non-negotiable. The truth of the matter is that some franchisors are willing to negotiate terms and certain terms are more negotiable than others. For example, while franchisors may not be flexible in negotiating their royalty rates, they may be amenable to negotiating the required schedule for opening the franchised business, extending a franchisee’s time to do so. Generally, whether or not the franchisor is willing to negotiate terms and if so, which ones and to what degree, is matter of leverage. Factors may include how long the franchisor has been in operation, the size and scope of the franchise system, how eager the franchisor is to sell a franchise and the extent of the franchisee’s business experience or financial backing. Regardless of your level of business experience, when purchasing a franchise, it helps to have an attorney experienced in franchise sales representing your interests. Please contact us if you have any questions.

To be official, a franchise system must be transparent. There can be no part of the system itself that is hidden from the prospective franchisee. The most convenient way to do this is by preparing a disclosure document and this document has become “a must” for every bona fide franchisor. Although there are no franchise laws in Cyprus which compels franchisors to have a disclosure document, as is the case with many countries around the world, it has become an unofficial standard of good practice in franchising.

In essence it contains information that a prospective investor needs to make an informed investment decision.

The advantages to purchasing a franchise rather than attempting to start your own business can be great. In part, purchasing a franchise means buying a proven business system. As a franchisee, you tap into the franchisor’s knowledge of how to operate its business. This saves time that would normally be spent on development and cuts down on mistakes that are typical of young businesses. You also receive sufficient training to operate the business and ongoing support and assistance to help solve problems. In some instances, franchisors also create a national advertising program which benefits all franchisees by creating national exposure that would normally be impossible for new businesses.

Generally, franchises fall into two categories, franchises either operate in the retail sector or in any of the service industries. In each of these categories, a vast array of options exists in the types of franchises offered. For retail franchises, franchisors may offer anything from full retail store franchises to kiosk franchises to store-in-a-store franchises that offer all product lines, one product line or a combination of the product lines. Similarly, for service franchises, franchisees can offer a full assortment of services, one specific service or a combination of services. The types of franchises that may be offered are varied, each as unique as the particular business model developed by the franchisor.

If there is a “Contact” button at the bottom of the page, then filling in the form will give you the best information at this stage. Most franchisors have pre-prepared information packs that will be emailed or posted to you containing almost everything you would want to know. Far more than you will get from a telephone conversation.

If it is a Restricted Listing, then you can email us at info@cyprusfranchising.com requesting that we send you the contact details, making sure you identify the franchise you are interested in. Please do not telephone for this information as we do not release these details over the phone. We need to provide the data with qualifications and contact information and it is disruptive for someone to have to attend to your request on demand.

At cyprusfranchising.com, we provide an advertising service and cannot tell you more than the information you already see displayed. You need to contact the franchisor unless otherwise stated on the listing.

Sometimes not much, and sometimes quite a lot!

In short, franchises often provide more security, are considered to be less risky, are bigger operations and cost a lot more than the typical business opportunity. Business opportunities usually provide a limited range of products and services and a business plan to use for blueprinting the operations. But it’s a grey area with a lot of variances.