Immigration offers a valuable source of new skills and new employment for New Zealand, and potential migrants have a number of immigration options when applying for residence. One of these options is specifically aimed at the business sector and is of particular interest to franchisors and franchisees. It's called the Long Term Business Visa (LTBV).

The LTBV caters for people who are interested in establishing a business in New Zealand either without living permanently in the country or to meet the relevant criteria for residence under the Entrepreneur category. These criteria are to contribute to economic growth through:

• Increasing New Zealand's level of human capital
• Encouraging enterprise and innovation

In the 2005/ 2006 year, the Department of Labour approved over 150 LTBV applications. Over 100 applications have been approved so far this financial year (2006/2007). So far, most aplications have come from the UK (39%), the USA (12%), India, Fiji and South Africa (6%). The largest group of applicants is in the 40-49 age band although there is no age limit. However, applicants do need to meet the same health and character requirements as any other migrant wanting to come to New Zealand.
Successful applicants receive a visa/permit valid for three years. There is an initial nine month permit to give them time to get the business operational in New Zealand, after which they may apply for the balance of 27 months to get the remainder of the permit.

Applicants under the LTBV category must have sufficient funds for maintenance and accommodation for the full three years of the permit. The definition of ‘sufficient funds' dependes on the person's individual circumstances and is decided on a case-by-case basis. Applicants also need to be able to show that they have a minimum standard of English. While there is a standard English test for migrants, the policy enables the Department to look at the wider picture, including whether the applicant's family speak English or whether they previously operated in a sector where English was part of business life. A key requirement is that applicants must not have been bankrupt or suffered any business failure in the past five years.

Business Plan

In order to be considered under the LTBV, applicants must have:

• Access to start-up capital, legally-earned or acquired, to establish a business in NZ or own a minimum 25% share in the business. The ‘legally-earned' requirement means the Department must be able to see where the money has come from - for example, through the sale of property or a business with a clear trail through the banks.
• Realistic financial projections for three years. All applications under the LTBV must be accompanied by a business plan that shows the proposed business is capable of turning a profit within three years.
• Business experience relevant to their business proposal or high-level management or any business ownership experience. Ideally, the Department looks for people who have done the same or a similar business in their own country, but we recognise that franchises often train people to work in different fields so we are realistic about that. Under those circumstances, if they have run a successful business we'd usually be happy. If not, we look for high level management experience - people in positions where their decisions affect the running of the business rather than middle managers.
• Researched into the proposed business and the business environment in New Zealand and have a genuine interest in establishing the business here. Nothing beats good research. There is no actual requirement for applicants to have been here but it does help to get an overview of the conditions, the market, the competition and the opportunities.

Benefit to New Zealand

In order to be accepted under the LTBV scheme, applicants must be able to demonstrate that there is a real benefit to New Zealand by promoting economic growth. Their application must therefore meet one of the following criteria: 

• Introducing new, or enhancing existing, technology, management or technical skills; or 
• Introducing new, or enhancing existing, products or services; or
• Creating new, or expanding existing, export markets; or
• Creating employment (other than employment for the principal applicant); or 
• Revitalising an existing business.

In general, the ‘creating employment' criterion is the easiest one for prospective franchisees to meet; however, one person or owner/operator franchises do not qualify.

Applying For Residence

Once an applicant has held the LTBV permit for two years, they may apply for permanent residence under the Entrepreneur category. Applicants must be able to demonstrate that:

• They have established a business in New Zealand. 
• They are self-employed in the business. 
• The business is benefiting New Zealand.
• The business is trading profitably or has the potential to be trading profitably within 12 months after the application is made.

There is an expectation that the applicant has spent a minimum of two years in New Zealand.

Good News & Bad News

The Department of Labour recognises that franchising is a significant part of the small business market in New Zealand. However, it sees both positives and negatives.

On the positive side, people buying a franchise find that most of the groundwork has already been done for them. There is a plan to follow and training is provided. For an immigrant trying to establish a new business in a new country with new laws, that can be very helpful.

Some franchises come with an existing client base, which helps them become established. In addition, there is not only support provided by the franchisor but also an infrastructure of advisors - banks, lawyers and accountants - to assist.

On the negative side, the level of capital investment in many franchises, particularly the owner/operator ones, can be quite low. From the Department's point of view, this raises questions as to their long-term commitment and intention. In general, the more capital they bring to New Zealand the more likely they are to be able to overcome any difficulties they might face if the business doesn't work out. Employment is another major factor. Franchises often offer low additional employment and are therefore not approved. One approach that franchisees and franchisors might consider that addresses both of these issues is to buy more than one lower-investment franchise, thereby generating enough income to employ someone to run the second one.

One other issue that franchisors need to address is that a lot of business plans prepared by franchisors often seem to be generic: they don't seem to relate to the geographical area that the applicant proposes to go into or do not contain research on local competition specifically.

Immigration & Franchising

The purpose of the LTBV scheme is to encourage experienced business people to bring capital, experience and know-how to New Zealand and by doing so to create employment and make a contribution to our economy. The Department's role is to help ensure that we attract the right people and make sure that they have every chance to succeed.

We want such people, we need them and we recognise that franchising is one of the easiest ways in which immigrants can enter the business market here in accordance with the above requirements. However, not all franchises meet the employment and investment criteria. The Department does have a certain amount of discretion and each case is judged on its own individual merits. Prospective applicants looking at franchises should therefore bear in mind all the above when researching their options.

This article first appeared in Franchise New Zealand magazine Volume 16 Isue 1.

Click here for more information on emigrating to New Zealand and buying a franchise, including ten top tips for new immigrants. 

The Franchisor's View - 1

"We currently have full employment in this country, which is what makes finding good new franchisees difficult. Immigrants who buy franchises can create new businesses and generate positive economic activity with a far higher likelihood of success. I find it frustrating that our current policy actually legislates against owner/operator franchises and that they must actually employ someone to be considered of value to New Zealand.

‘This is an area where I believe we as franchisors need to be prepared to work together to help the Department of Labour understand the value of franchising better. I would be happy to provide statistics on success rates and longevity of our franchisees' businesses, and I am sure other good franchisors feel the same.'

The Franchisor's View - 2

"Requiring immigrants to have relevant business experience has always struck me as odd when you are talking about buying a franchise. Very few franchisors require it, because they run their own training programmes and, let's face it, franchisors are even more committed to the success of their franchisees' businesses than the Department of Labour. Almost none of our 100-plus franchisees had previous experience in the home services sector and yet they are very successful. Most chose their businesses because they wanted a change from their previous jobs - yet only relevant experience counts.

"The employment requirement also strikes me as odd. We could appoint a regional master franchisee who could create 12 new franchised businesses in his area but wouldn't qualify under the LTBV. Yet if he appointed an office girl, suddenly he's creating employment. Which is of greater value to New Zealand's economy?'