Do you want to start your own business but don’t know much about the business world? Here is something interesting to help you get started. You have probably heard of the term “franchise.” A franchise is a legal business agreement under which an entrepreneur gains the right, under the terms specified in the franchise agreement, to use an existing (often internationally known) business concept and trademark. In return, they pay periodic usage fees (royalties), a one-time initial fee, and/or advertising fees. The franchisee also has the right to receive necessary training, information, and guidance to operate properly within this business concept.
I believe that franchising is a good opportunity for a beginner entrepreneur to test themselves. Why?
You don’t have to invent everything from scratch.
A franchise minimizes beginner mistakes and the risk of failure. The control over business operations by the franchisee is minimal because the system is already developed and functioning.
With a franchise, you gain access to many contacts (including suppliers).
By purchasing a franchise, you join a controlled advertising mechanism or so-called joint advertising.
It’s like you’re not starting from zero—the product or service is already recognized.
It might sound like a miracle now—no, it’s not! If you don’t control your income and expenses (as in any business), owning a franchise (a well-known name) doesn’t guarantee profit! But it’s like running your own business based on a proven and reliable business model, which is often safer (and perhaps simpler in some ways). Within this effective business model, you can control your product range, prices, employees, wages, and other costs—thus influencing your profit.
What are the advantages and disadvantages of franchising?
Advantages:
- Since the brand is already well-known, it provides a significant competitive advantage.
- No need to invent—production processes for goods or services along with all components are written into the contract.
- An established business model and plan significantly reduce risks.
- The franchisee can utilize the franchisor’s knowledge, skills, and experience based on long-term practical success.
- Training and support are available for franchisees, reducing failure risk and helping avoid management mistakes.
- Sometimes franchisors offer financial support or act as guarantors.
- The benefit of joint advertising across the entire franchise network.
- Access to a global customer base.
- Access to supplier networks.
- Market analysis information can often be obtained from the franchisor.
Disadvantages:
- Control by the franchisor—lack of independence.
- Reporting obligations.
- Limited creativity—everything is specified in the contract.
- Price policy must be coordinated with the franchisor.
- Licensing, franchise, and advertising fees.
- The initial investment can be very high.
- The list of suppliers is strictly defined.
- Non-compliance with contract terms can easily lead to losing the business.
- Risks associated with the franchisor.
If you already have some idea of what awaits you (fees and strict control but valuable experience), it’s time to choose a franchise.
Where to start?
First, select an industry that genuinely interests you! Be sure to research whether there is intense competition in that field and if there are enough customers. Calculate how much you could invest without risking or taking out loans.
How to choose a franchise? — You can find 60 offers at [https://www.franchising.ee](https://www.franchising.ee) or see more options at [https://www.franchiseeurope.com/european-franchises/estonia/64/](https://www.franchiseeurope.com/european-franchises/estonia/64/). When reviewing franchise options, pay attention to these aspects:
- Franchisor’s background
- How large are the start-up costs?
- How high are ongoing fees and what do they include?
- What is the expected payback period? What are projected financial results or ROI?
When choosing a specific franchise, check whether it includes:
- An already established business concept that has been on the market for a long time;
- A well-known brand registered in Estonia;
- Training programs;
- Daily management manuals;
- Marketing support and other assistance (e.g., launching sales points);
- Proven experience exchange with other franchisees.
Additionally, investigate:
WHAT ARE THE REQUIREMENTS FOR A FRANCHISEE?
- How important is adherence to the concept versus how much decision-making freedom do you have?
- How does reporting work with the franchisor? What key indicators are monitored?
- What are this franchise’s competitive advantages?
- You can request introductory materials (franchise brochure, sample contract, questionnaire for getting acquainted with potential franchisees).
- How can the contract end? What happens afterward?
- What penalties or sanctions exist?
In conclusion: I still believe that franchising offers an excellent opportunity for an aspiring entrepreneur to test themselves while gaining valuable experience from industry professionals who have already succeeded. Good luck with your choice and testing! If needed, we are always ready to assist with financial, business, or tax advice.
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