As the Baltic markets get more and more competitive, local brands find it more and more difficult to fight their way to customer’s hearts and wallets. In some industries it may prove to be more effective to work under a well established local or international brand. It is possible under a franchise. Franchise is a set of exclusive rights which the franchise holder grants the franchisee based on the franchise agreement. Such rights may relate to design, know-how, trademarks, brand and other intellectual property for provision of services or sale of products.
While franchise arrangements differ, they mainly consist of the following important components – trademark, know-how, advertising, personnel policy and supplier contracts.
What are the benefits of franchising?
- Recognised trademark and a proven business model.
- Franchise right holder’s support such as training of personnel.
- Market analysis, marketing and advertising.
- Consultations (little business experience required).
Franchise also includes certain downside: setting up and legal costs, regular payments to the franchise right holder, management limitations.
How much does a franchise cost?
The one-off initial fee will depend on the type of the franchise business and will typically be between EUR 5000 and 100 000. The franchise user will have to pay the franchise rightholder a certain income and EBIDTA percentage.
Why is it better to franchise rather than start up your own business?It is viable option because in the life of the agreement the franchise rightholder will provide the franchise user with consultations and support for setting up the business and during the course of the entrepreneurial activity. The franchise user has the right to use the trademark, business know-how, etc. thus benefiting from a recognised brand from day one.