Buying a franchise in New Zealand – what you need to know

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New Zealand’s track record of franchise success

New Zealand is a country of small businesses. Over 97% of businesses have fewer than 20 employees, and self-employment is a popular option for many. Under these circumstances, it is not surprising that franchising has flourished.

Good franchises combine the focus and commitment of local operators with the systems, support and marketing of a larger brand, enabling small businesses to compete successfully with large chains. As a result, New Zealand probably has more franchise systems per capita than any other country in the world, and can offer business opportunities in a huge range of industries from business services to building, retail to education, food to beauty.

Buying a franchise can be an ideal way for a new immigrant to get into business. You get a known brand, a product or service that is designed for the local market and a variety of appropriate marketing tools.

Make no mistake, you’ll still have to work hard to establish your business – getting used to how things work and how people communicate in a new country is never easy – but you’ll have training and support to ensure your efforts will be directed into activities proven to produce results.

In general, franchise systems welcome immigrants as franchisees because their energy and enthusiasm to establish themselves in a new country are huge positives. Immigrants, however, need to recognise that not all franchises are equal and that what suits one person may not suit another. You should, therefore, carry out proper research before committing yourself to any business opportunity.

Will being a franchisee suit me?

Before you purchase a franchise in New Zealand, there are some important questions you must ask yourself, including:

  • Is the business a good match for my skills and abilities?
  • Can I afford to support myself until the business is making a profit?
  • Will the business provide the income I want in the future?
  • What will I actually be doing on a daily basis?
  • What hours will I need to work (including after-hours admin)?
  • Do I need to employ staff? What skills do they need?
  • Can I spend a few days working with an existing franchisee to see what it’s like?

Which type of franchise is best?

The “best” franchise relies entirely on you and your specific skills and circumstances. Therefore, it is important to again answer several questions, including:

  • How long has the company been operating and how long has it been franchising?
  • How many franchisees does it have?
  • Who/where is the competition?
  • What advantages does the franchise have to offer its customers?
  • Is there a long-term future for the business?
  • Is the industry the franchise operates in growing or shrinking?
  • Are the sales levels and costs realistic?
  • What figures can the franchisor produce to back up their claims?
  • Who is already achieving success with this franchise – and can I talk to them?

Financial and legal considerations

If establishing a business is one of your visa requirements, check that your chosen franchise will actually qualify at an early stage. Many – particularly those that do not require you to employ staff – do not.

Additionally, ask the following questions of the franchisor, in order to communicate effectively with your accountant and your legal advisor:

  • What are the total costs of going into the business: fees, set-up costs, leases, vehicles?
  • How does the franchisor make money?
  • Is there an initial franchise fee, an ongoing royalty fee which is fixed or based on turnover, or a mark-up on products sold to me by the franchisor?
  • Is there a guaranteed level of work or income? (If yes, there will be very strict conditions – make sure you understand them)
  • How long does the franchise agreement last? Do I have a right of renewal at the end of the limited term?
  • Is there an exclusive territory?
  • How soon can I have a copy of the franchise agreement to take to my lawyer?

Training and support

Immigration New Zealand may require that you undergo full training before purchasing a particular franchise in New Zealand. Ensure you know what is expected and that you are qualified to run the franchise after purchase by asking the following questions:

  • What are the most important attributes of a successful franchisee in this particular business? Do they match mine?
  • What training will I receive initially and how long will it take to complete?
  • Will it teach me how to manage and grow my business as well as the basic tasks?
  • What level of support can I expect?
  • Will I have regular visits from a member of the franchisor’s team?
  • Will somebody help me analyse my performance and suggest improvements?

Get the right advice

As you can see from the above, it can be difficult to research a New Zealand franchise opportunity properly from another country, so don’t commit until you have checked things out on the ground. Above all, take professional advice from a New Zealand lawyer and an accountant, experienced in franchising, before signing up. Advice might seem expensive, but it’s cheaper than putting all your savings on a loser.

Don’t skimp on your research, and don’t rely upon your immigration consultant to do it for you. Franchising is one of the best ways to get into business in a new country, but there is still a risk involved. You’re making a big decision, so it’s up to you to satisfy yourself that any opportunity is genuine and is suited to your own abilities and needs.

written by Simon Lord, founder of Franchise New Zealand magazine and website

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