Franchise Information

Business franchises in New Zealand have only become well established relatively recently, as Kiwis begin to reap the benefits of the franchising business model. Read on for information on New Zealand franchises.

What is a franchise?

A franchise is a business operated by the franchisee under license from a franchisor. This licence is purchased and gives the franchisee the right to use trademarks, giving them access to the proven business methods and expertise of the franchisor. In return for ongoing support and advice, royalties and fees (usually a percentage of profits) are paid to the franchisor. The key idea is that the risk inherent in buying a business is minimised with a franchise, as you are buying a proven and successful commercial concept.

What kind of New Zealand franchises are available?

Franchises in New Zealand have experienced phenomenal growth over recent years. Franchise businesses are operating in many sectors of the New Zealand economy. Some of these businesses (McDonalds, The Body Shop, Subway) are licensed from huge overseas corporations; however others (Green Acres, Hire a Hubby, Fastway Couriers, Burgerfuel) were founded and are based in New Zealand. So well have Kiwis taken to new franchises, that our country has the highest number of franchise systems per capita in the world.

How does a franchise in New Zealand work?

At its core, franchising is a method of distributing an established business system to new territories. A crucial document is the franchise operations manual which is an extremely detailed document of the franchisors proven commercial systems and success. This manual will specify exactly how the business should be operated. In addition, a comprehensive franchise agreement is drawn up. This agreement covers:

• The franchisee's rights to use the system and the brand.
• Where the business can be operated (territory), over what time period, and if the license is exclusive or otherwise.
• What fees are payable to the franchisor, which may include marketing and advertising fees, as well as a percentage of profits.
• Conditions on the property in which the business is operated from (upgrades may be compulsory from time to time and certain standards must be adhered to).
• Products or services for sale will be restricted (for instance, a McDonald's franchisee would not be allowed to sell alcohol), and in some cases products may be required to be purchased from the franchisor.
• Clauses on whether the agreement can be sold on or transferred, rights of renewal, and key details on how the franchisor can terminate the agreement if conditions are not met, or they feel their intellectual property and goodwill are being damaged by the actions of an unruly franchisee.

What are the advantages and disadvantages of owning an NZ franchise?

A franchise for sale in New Zealand might seem like a risk free way to run your own business, but remember, as with any business, there are advantages and disadvantages. Here's a quick overview:

Advantages may be...

• Ease of start up: because of the proven franchise system, a lot of work is done for you by the franchisor. Assistance is available with selecting a site, negotiating with suppliers, and brand recognition is instant as opposed to having to be built from nothing.
• Training and marketing help: the franchisor will assist with training, minimising teething problems, and marketing will often be done on a nationwide basis, giving you one less thing to think about as you concentrate on making your franchise business a success.

Disadvantages may be...

• Control: for a franchisee, it can prove difficult having no overall control of the running of your business. The system must be followed and any changes must be approved by the franchisor. This could be extremely stifling for a budding entrepreneur!
• Disagreements: can and often do occur between franchisor and franchisee. These can be difficult to resolve amicably.
• Costs: franchises in New Zealand can be expensive. As well as the initial costs and ongoing slice of profits going to the franchisor, compulsory ongoing upgrades, maintenance and supplier contracts will often prove costly.

Before entering into an agreement to purchase an NZ franchise, it is prudent to seek comprehensive professional advice. If the franchisor is a member of the Franchise Association of New Zealand they will be bound by certain rules and guidelines, and a mediation service for dispute resolution is available. Best of luck enjoying the fruits of a proven, successful, franchise system in New Zealand!

Looking for more information? Find New Zealand franchises in the NZS.com directory.

Get published online by adding an article to the NZS.com Articles section. Before you add your article read over our guidelines for article creation and find out the benefits of publishing on NZS.com.

Business images from Flickr: Sky Tower, New Zealand Flag and Wellington Buildings.