Westpac - new kiwis START HERE

If you’re an immigrant starting afresh in New Zealand (or even a Kiwi returning home after a long absence), getting into business for yourself may seem like a good option. As bankers, we field many questions from people in this position and we’re happy to help. Here are some of the most common:

• · Would employment or owning a business be the better option for me?
• · Is owning a franchise a better bet than starting or buying an independent business?
• · Is it easier to fund a franchise than another kind of small business?
• · I have some money saved but will need funding to afford both a house and a business. Should I buy the house first and then look at a business, or is it better to buy a business first?
• · What criteria do franchise systems have for franchisees coming in from overseas?
• · How do I know which franchises are the good systems?
• · Who can I talk to to get more advice?

Getting to grips with the answers to these questions is important to anyone contemplating investing in a new business environment. Unfortunately, the right answer to each question will vary according to your circumstances, but here are some points to consider.

Employment or ownership?

New Zealand is a nation of small business owners and entrepreneurs, so the opportunity to be your own boss is already a reality for many – in fact, it may be the reason that attracted you to come to NZ in the first place. But finding a job in the current market can be hard unless you have skills that are in demand, so self-employment may be a more practical option.

Franchise versus independent

If you don’t know the New Zealand market but have the skills to run a business, buying into a franchise can make sense. Getting going on your own can be hard, so buying into a proven and systemised business can make sense. From a newly-arrived immigrant’s perspective, the selection, marketing, training and ongoing support offered by most franchise systems can be very attractive. The increased purchasing power of a franchise group can help you get the best deals on stock, advertising, recruiting and all sorts of other services from insurance to telecommunications.

Is a franchise easier to fund? 

Buying an independent business is usually seen as a risky investment. That’s especially true for someone coming from overseas with little knowledge of the local market. If you have no credit history, you may also find raising finance difficult. However, if you have the right attributes and some funds to invest, buying a franchise could be a great solution. A bank like Westpac, which has a specialist franchise unit, understands that the better-known franchise systems have strong systems and brands which lower the business risk considerably. They may therefore be prepared to lend against the new business itself (provided the figures makes sense). In practice, this means that potential franchisees need to invest less of their own money and can secure part of the investment against the assets and future cash flow of the business. This is a great outcome for investors.  

House or business first?

This will depend on your own situation. Buying a house is often an emotional decision that helps immigrants put down roots in a new land, so it may be important to you. If you choose to invest in a house, though, it needn’t stop you buying a business as well – the house becomes an asset against which you can secure a business loan. Remember, though, that as banks will only lend against 80% of a house’s value, you will be locking up 20% of your equity in the property.  Buying a business with good cash flow/profits could put you in the position to buy a house as this is seen as a lower risk. If you want both house and business, it’s a good idea to talk to a banker before making the decision so you know what’s possible.

What special criteria do franchise systems have for franchisees coming in from overseas?

Generally, franchisors are less interested in where you have come from than whether you have the ability to run a successful business. However, they may have some specific concerns about applicants from overseas, including:

a) Do you understand the differences between a franchise and an independent business?

b) Do you have the necessary skills to run the business successfully?

c) Is your English of a sufficiently high standard to enable you to communicate well with customers, staff and the franchisor’s own team, and to grow your business?

Some franchises (such as some of the commercial cleaning businesses) are more attractive to new arrivals because they are designed to manage much of the customer contact on the franchisees’ behalf. However, having good English will give you more choice and will help your business grow.

So how do you choose which franchise to invest in?

A good starting point is to look at something that you will enjoy and which is a good match for your own interests and skills. After that, consider the wider issues, like which industries are in a growth phase, then narrow your search down to the franchises operating within that industry. Every franchise will be different so you need to look at many different options. Don’t just focus on one particular franchise because other immigrants have already chosen it – they may have different skills or different needs from you. You may also find that another franchise can offer you a better choice of locations. The important thing is to choose a business that suits your own personal, financial and business goals.

How to get more advice

Westpac publishes a Guide to Franchising which provides a framework to help people make the right decision – this is available by calling freephone 0800 177 007. See also the Franchise New Zealand website at www.franchise.co.nz. 

Talk to existing franchisees in the system you are looking at and find out what the business is really like. Talk to a specialist franchise banker to help you work out what is possible and identify realistic funding options. Finally, don’t commit yourself to anything without consulting a franchise-experienced accountant and lawyer. You’ve already made one big decision in coming to New Zealand – buying a business is another major step, so do everything you can to help you get it right.

This advertorial is taken from Franchise New Zealand magazine Volume 20 Issue 1 

Contact details for Westpac

For more information and advice on buying a franchise get your FREE copy of Franchise New Zealand magazine. 

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