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THE MOST FRANCHISED COUNTRY IN THE WORLD

by Simon Lord,
last updated 20/09/2017

Franchising is a way that independent business owners can compete with large corporates. That’s especially important in a small country, where we could so easily be dominated by overseas giants. That’s why it’s good news that a new survey shows New Zealand is the most franchised country in the world. The 2017 Franchising Survey reveals lot of other useful facts about franchising, too

It’s been five years since the Massey University Business School and Australia’s Griffith University published their last survey of the franchise sector in New Zealand, but it’s been worth the wait. The 2017 survey is the most comprehensive ever, with over 160 franchises providing detailed information on their size, turnover, fees and franchise relationships.

The results confirm that New Zealand is the most franchised country per capita in the world, with 631 different franchise systems and 37,000 franchise units around the country. It also confirms that the turnover of the franchise sector has grown strongly since 2012, with an overall turnover of $27.6 billion compared to an equivalent figure in 2012 of $15.0 billion. That’s an increase of 84 percent over five years. And that doesn’t include motor vehicle sales or fuel retail, which bring the total to $46.1 billion.

The benefits of franchising

Why is this good news? Well, in many industries, small businesses are increasingly competing for market share with large, publicly-listed or overseas-owned corporations, which is a tough ask. Franchising gives the little locally-owned guys a way of taking on the big guys.

In order to survive in an increasingly competitive and global market, independent operators have needed to develop significant business and management skills. Very few actually have any formal business education, which may be one of the reasons why such a large proportion of new small businesses last only a few years. But by buying a franchise, individual operators can gain access to professional product or service design, marketing, costings, benchmarking, training, upskilling and many other services. They learn how to plan, how to cost and how to manage cash flow.

Yes, franchisees pay for these services through their franchise fees, but if they have chosen their franchise wisely then they should get good returns for their money. And if they move on after a few years, they take with them all sorts of valuable business skills that they would not have learned any other way. Looked at this way, franchising is a means of upskilling our entire entrepreneurial population.

Franchising also benefits the New Zealand tax-payer. In 2016, an investigation by the New Zealand Herald revealed that 20 top multi-nationals, including brands such as Apple, Google and Facebook, paid virtually no income tax in New Zealand. The very structure of franchising means it’s rather more difficult for a company to channel its profits overseas. Yes, a small percentage of the purchase price of every Big Mac may end up in Illinois, but it’s a fraction compared to the proportion of spend that ends up in Dublin via Google, Linked In and others. Local franchisees pay local taxes.

Helping franchise buyers

The survey allows us to see just what sort of franchises are operating in New Zealand, where the growth is happening, what franchises cost, what sort of training they provide and much, much more.

If you’re looking at buying a franchise, the survey will give you valuable background information into ...

This article appears in full in the latest issue of Franchise New Zealand magazine (Year 26 Issue 3). Read the entire article in the digital magazine or, if you live in New Zealand please send for your free print copy.

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