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Franchising explosion in New Zealand: good news abounds for those looking to expand in this island nation. (FW Focus: International).

Franchising in New Zealand is continuing to grow and expand at a very fast rate as evidenced by the results of the 2001 Survey of Franchising.

This survey has confirmed that franchising in New Zealand accounts for an annual turnover (sales) of over NZ$10 billion. The number of systems operating in New Zealand is over 300, the number of people working within franchising is over 70,000 and the number of systems, outlets, and those employed in them exhibited a 25 percent increase during the last year.

A key statistic is that 77 percent of the operations originate in New Zealand. This shows that there is great scope for overseas franchisors to enter New Zealand but not to dominate the market. The median total start-up cost is NZ$125,000 and the failure rate for franchise units is less than 6 percent over a three-year-period.

It is fair to say that the future prospects for franchising in New Zealand are both positive and exciting.

I am a past chairman of the Franchise Association of New Zealand, which started in July 1996. Prior to that date, New Zealand was part of the Franchise Association of Australia and New Zealand Limited. There are now over 170 members of the Franchise Association of New Zealand and more than 100 are franchisors. The rules of the association include a mandatory Code of Practice which all franchisors must adhere to. Included in this code are the requirements for a seven day cooling off period and for dispute resolution to be used in all cases where a dispute arises.

The 2001 survey confirmed that 30 percent of franchising relates to retailing, including food, beverage and other retail. Property and business services account for 16 percent, construction and trade services 14 percent and personal and other services 7 percent.

The growth in the number of franchised units over the past year was spectacular, being over 25 percent per annum. This is good news for overseas systems looking at entering New Zealand which is the most deregulated country in the world to operate small to medium businesses. We have double taxation treaties with most countries which means that income and profits can be repatriated with tax credits being granted.

Survey Highlights

* The results are collated from 111 Franchise Systems who responded to the questionnaire.

* An estimate of the total number of systems operating in New Zealand is 300.

* Franchising in New Zealand can be estimated to account for $10B annual turnover.

* The number of people working within franchising is estimated to be 70,000.

* The number of franchised and company-owned units is estimated to be 14,000

* The number of systems, outlets, and those employed in them exhibit 20% increase pa.

* 20% of the systems franchised started within the last three years.

* The largest industry groupings are moving from the Retail (Food and Non-Food) sector (34%), to services (56%).These are made up of: Property and Business (16%), Construction and Trade (14%), Personal and Other (7%), Finance and Insurance (5%), Education (5%), Cultural and Recreational (4%), Health and Community Services (3%) and Accommodation, Cafes and Restaurants (2%).

* 77% of the operations originate in New Zealand.

* The median total start-up cost is $125,000.

* The use of support systems for the franchisees is increasing. In particular the use of the Internet is becoming widespread with 84% of systems having web sites.

* Only 28 (25%) of systems had applied for finance within the last year. The median hiring on the availability was `good' (30%) to `very good' (33%), an improvement on 2000 when `adequate' was recorded.

* Only 16% did not consider that the Franchise provided a good return on investment for the franchisor (and 6% for the Franchisee), with 31% of respondents rating their system as Excellent and 46% as Above Average

* The failure rate for franchise traits is less than 6% over a three-year period.

* The future prospects for franchising in New Zealand remains sound. Strong growth has been reported throughout the five years of the survey.

Stewart Germann is past chairman of the Franchise Association of New Zealand and a lawyer practicing in Auckland. He can be reached at stewart@germann.co.nz or P.O. Box 1542.
COPYRIGHT 2001 International Franchise Association
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Copyright 2001 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Germann, Stewart
Publication:Franchising World
Article Type:Brief Article
Geographic Code:8NEWZ
Date:Oct 1, 2001
Words:701
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