Franchising in Cyprus
Economy
Economic affairs in Cyprus are dominated by the division of the
country into the southern area controlled by the Cyprus Government
and the northern Turkish Cypriot-administered area.
The Greek Cypriot economy is prosperous but highly susceptible
to external shocks. Erratic growth rates in the 1990s reflect the
economy's vulnerability to swings in tourist arrivals, caused by
political instability on the island and fluctuations in economic
conditions in Western Europe. From 1 January 2008, the country
entered the Eurozone and adopted the euro and monetary policy is
dictated by the European Central Bank.
The Turkish Cypriot economy has about one-fifth of the
population and one-third of the per capita GDP of the south.
Because the Turkish-Cypriot de facto administration is recognized
only by Turkey, it has had much difficulty arranging foreign
financing, and foreign firms have hesitated to invest there. The
economy mainly revolves around the agricultural sector and
government service, which together employ about half of the work
force. The tourism sector also contributes substantially into the
economy. Moreover, the small economy has seen some downfalls
because the Turkish lira is legal tender.
Legislation
There is no specific franchise law in Cyprus. As a
consequence, the general rules of contract law apply.
Franchise Market
There has been a steady growth of franchise brands in Cyprus,
fuelled in part by a growing domestic appetite for foreign brands
and the shopping expectations of visiting tourists.
Franchise Legislation
Cyprus is a common law country.
- there is no franchise disclosure law in Cyprus
but under general principles of contract law the franchisor must
not make any “misrepresentations”, as defined by Cypriot Contract
Law
- there is no franchise registration
- rules affecting consumers, like the Unfair Contract Terms Act,
special provisions on warranties and product liability etc. seem to
influence the courts in applying a certain degree of protectionism
towards the weaker party in business-to-business agreements.
Therefore a certain degree of fairness and reasonableness should
always be born in mind when drafting a franchise agreement
Conclusion
A careful review of legal documentation is essential before
franchises are sold Cyprus. In addition to compliance with
mandatory laws a good understanding of local business practice is
key to local success. An appropriately customised disclosure
document would also be appropriate.
For more information please contact Gordon Drakes.