Franchisees are willing to pay these amounts because they expect to obtain the identity afforded by the chain, a proven business concept, an established network of suppliers and the franchisor s know-how and support. Studies have shown that the failure rate of newly established business is much lower for new franchises than for those that are independently operated. There are more and more name brand products and services on the Estonian market. Many are offered through franchised systems, for a variety of reasons. All of the elements that make franchising attractive in general apply when foreign-based companies consider expansion into another market.
Expansion is fast and relatively inexpensive for the franchisor.
Moreover, it avoids many of the liabilities and commitments inherent in running foreign operations through its own personnel, while capitalizing on local experience. Estonia s legal system has developed to the extent that trademark protection and licensing provisions are in place. The parties to a franchise agreement have traditionally been viewed as business partners who can settle their affairs by contract. Interference in the franchise relationship has only begun to occur in specific states in the U.S. over the past decade or so. In Estonia, the general legal framework for transactions, including the General Principles of the Civil Code, will apply to the contracts entered into.