If you are reading this article, it means you have some interest in opening a franchise in New Zealand. Businesswise it is a brilliant idea. Operating a franchise has its many benefits. Especially operating a franchise in New Zealand will surely give you a good Return on Investment.
Speaking of the economy of New Zealand, it is a highly developed free-market economy. The country relies mostly on the export market. It is the 53rd largest economy in the world measured by nominal Gross Domestic Product. Leaving all that technicality aside, the bottom line is, the country’s’ economy is favorable to any type of business, including the New Zealand Franchise.
A franchise is a marketing concept an organization uses to expand its business. The parent company is the ‘franchisor’ whereas the counterpart is known as the ‘franchisee”. In a franchise, the franchisor, licenses all its company’s’ functions, procedure, intellectual property, brand and the rights to sell its products or services to the franchisee. The franchisee also uses the business model that the franchisor implements. In return, the franchisee agrees to pay certain fees and complies with obligations as per the “Franchise Agreement”.
The franchise has increased in popularity during present times. So popular that there are 423 franchise systems, operating 450 brands making the country the highest proportion of franchise per capita in the world!
How to start a New Zealand Franchise?
It is easy to start a franchise in NZ. You will be delighted to know that when opening a franchise:
- there is no entry barrier.
- No compulsory disclosure document requirement
- No requirement of registration
But there is a certain legal requirement that applies to franchise New Zealand. Franchise Association of New Zealand INC. (FANZ) The main requirements of the codes of practice are as follows.
The intended Franchisor must provide a ‘Disclosure Document’ to franchisee 14 days before entering the franchise agreement. This document usually contains Franchisors’ information, the franchise system & the franchise agreement.
The franchise agreement must contain provisions such as:
- A cooling-off period of 7 days which allows the franchisee to cancel the agreement within 7 days of entry if he/she has a change of mind. The franchisee will receive a full refund excluding the franchisors’ reasonable costs.
- A dispute resolution provision providing mediation.
- Compliance with rules & codes requirements.
- The franchisee must obtain independent legal advice or certify that they decline that advice.
Requirements to set up a franchise in New Zealand:
- There must be at least one director who either lives in New Zealand or Australia (If it is an Australian, the person must be the director of a company in Australia)
- If the company is a subsidiary of a company, then you must submit details of the ultimate holding company to the Registrar of Companies.
- The companies registered office must be a physical office & not a postal center, virtual office or document exchange.
- It is not a must to have a company constitution for your franchise, but we recommend you to have one because only then certain provisions of the company’s act 1993 will be applicable.
|Good to know tip*** If a company is registered in Australia, and they want to set up business in New Zealand, they have to register on the overseas register as well. But the process is simpler because of the New Zealand company’s office and the Australian Securities & Investment source documents from each other.|
An overseas franchisor who wants to open a franchise in New Zealand must register as a foreign franchise.
There are many benefits that both franchisors or franchisees earn in a franchise deal. There are some disadvantages for both parties as well.
Note: You may read an article about the procedure to start a small business in New Zealand at Biz Blog.
For Franchiser in a New Zealand Franchise
- The Franchisor enjoys an international presence
- They can experience economies of scale
- The company can grow with little financial risk
- Franchisors receive a percentage of the profit as Royalty
- The franchisor often loses control of the franchisee’s business operations mainly if the outlets are geographically separated.
- Your company’s’ reputation may be in risk if the franchisee doesn’t live up to standards (cleanliness, quality, pricing, customer service, etc.) This will affect your brand name on the whole
- When considering expansion, franchising is not as effective as mergers or acquisitions
For Franchisee in a New Zealand Franchise
- New Zealand franchise is a low risk for franchisees because a tried and tested business formula is passed to them by the mother company. Additionally, they receive support & training to operate.
- The start-up cost is lower because the business idea is already developed.
- As franchisees buy a brand name that is already publicized, they do not have to start acquiring customers from scratch. Instead, they already have a customer base.
- Franchisee gets support from National marketing. As in the case of McDonald’s customers are awaiting the arrival of a new outlet.
- The franchisee can benefit from the many years of experience of the franchiser. This knowledge is harder to acquire when you are a new entrepreneur
- Entry & on-going costs are high. It would be a low cost for you to start a food outlet of your own rather than buying an already popular brand. Therefore, this is meant for wealthier businessmen
- The franchisee ends up paying a significant percentage to the franchisor as royalty, computer software & systems
- Some franchisors do not pay much interest in the franchisee & only expect due fees
- The franchisee must comply with franchisors’ rules & regulations wherein losing the flexibility of initiating his/her ideas in the business.
In conclusion, franchise New Zealand will give you many benefits. If you have the monetary resources, experience, and perseverance, you may venture into a franchise.
Six steps to consider when buying a franchise in New Zealand
Price: Our advice to you is to buy what you can afford. So, buy a small franchise and grow it to big business. Also, be sure to get financial advice on how much you should borrow.
Industry: Research! Do not venture into an industry that does not make many sales. Look for industries that have improved sales in a given period.
Fit: The chosen Industry must be familiar to you. Does it fit you & the environment?
Comparison: After choosing a list of industries, you must research which industry will suit you best. Compare each industry and invest in what you find is the best option.
Professional Advice: It is always good to consult a professional when investing. You may need advice from legal & financial experts. They will guide you and help you make appropriate decisions. In a franchise New Zealand, you must see a solicitor to draft the franchise agreement.