The less appreciated approach to making money in franchising

Franchisee entrepreneurs are attracted to a franchise business for many reasons.The less appreciated approach to making money in franchising.

Franchisee entrepreneurs are attracted to buying a franchise business for a variety of reasons including brand passion or wanting the support and guidance of an established business system. Universally, people invest time and effort into a business with an expectation of a financial return.

The conventional approach has broadly been one of two options depending on the individual's risk profile, experience, and capacity to build and develop a business.

The first, invest into a new or greenfield opportunity – grow the business and hopefully enjoy both positive cash flows generated by a profitable business, and capital gains over time by increasing the value of goodwill. By and large franchises grow their footprints on this platform with franchisee entrepreneurs.

The second approach is to purchase an established well-performing business with a proven trading history. This tends to attract franchisee entrepreneurs with a lower risk profile.

They have the benefit of being able to see the history and performance of the business, and in many cases it can be an easier operational path to follow. They are of course making an assumption, and assuming an associated risk, that they will be able to maintain the performance of the business, continue to enjoy the benefits of the business' profitability and protect the goodwill component.

The less-appreciated approach

There is a third and very neglected option for franchisee entrepreneurs, and one that I would suggest provides a number of potential upsides versus the two traditional approaches – this is to purchase an underperforming or even unprofitable franchise business. This sounds like it flies in the face of the universal objective of generating financial returns, but first we need to look at where and how financial return is generated.

What's driving performance and can it be altered?

The incomparable advantage of buying into a franchise system is the ability to see and use benchmarking information.

Independent businesses may have industry benchmarking, but a good franchise system will have not only an abundance of benchmarking information but more importantly, an understanding of what and how these outcomes or measures can and are influenced.

When looking at an underperforming business, the potential franchise purchaser needs to ask the questions: is it a good system, how does this business unit perform against others, what key performance indicators are out of kilter, and can I influence these? Is it sales, a goods management or cost of goods issue, or is it wages or perhaps fixed costs that can be improved?

The franchisee factor cannot be underestimated and if the purchaser is able to align the performance of the businesses KPIs to the systems benchmarking, just a small number of factors could move the needle of profitability from red to black.

Altering return on investment ratios

For a vast majority of businesses, once established, their value is a function of their profitability or goodwill.

Unfortunately, an underperforming business will often sell for less than its asset value.

This creates two opportunities for the purchaser; firstly, they can acquire the business for less than what it would cost to establish it.

There are additional potential cash flow and establishment cost savings.

Perhaps more substantial is the franchisee's ability to improve goodwill and the relationship this will have on business value.

Improved profitability creates goodwill which can create an opportunity for capital gains, for some business this can be substantial and create super return to investment ratios.

Made all the more attractive as in most cases there would be no capital gains tax if or when the business is sold.

Against this backdrop, I am not surprised that certain franchise systems have franchisees that are known as turnaround specialists who have bought and sold several businesses improving them along the way.

As greenfield opportunities shrink in some established systems and as well-established profitable business opportunities decline or command higher prices, I would not be surprised to see an increase in the skilled and less risk adverse franchisee entrepreneurs backing themselves and successful brands to take advantage or franchised turn-around opportunities.

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The world has changed, again!

To start, my assumption that we were entering a period we could define as “post Covid”, was completely incorrect, and should have been post lock-down.

Over a couple of articles written in mid-2020 I made some predictions around the post-Covid 19 economic and social environment and its influence on franchising in New Zealand.

To start, my assumption that we were entering a period we could define as "post Covid", was completely incorrect, and should have been post lock-down mark 1.

We're going to be living with Covid for quite some time, and if international trends are any indication, we are going to be extremely lucky to escape further significant lock-downs.

Having addressed the elephant in the room, let's look at the five trends that I called at the time.

1. Recession

Not a lot needs to be said here other than I was not alone on getting this wrong.
The implication for franchising is that franchising is generally counter-cyclical and it looked at the impact recession has on employment.

Employment had remained extremely high statistically, but bumpy, and this has fuelled a predicted increase in interest in franchising.

2. The best systems likely to be more successful

I predicted good systems would rise like the proverbial cream.

This is evolving and certainly in franchise recruitment circles two lines of questioning have developed over the past 9-12 months – how has the system/category faired over the past 12 months and how did the franchise system support it's franchisees over that time?

Those systems that have done well in these two areas will do well moving forward, I have no doubt.

3. Diversification of models

By diversification I suggested that franchisors would expand vertically through integrating their offering, and revenue base or perhaps horizontally by acquiring or developing additional brands in different categories.

Whilst it is hard to see any significant trend in this direction there have been a number of acquisitions.

But I would suggest that impetuous for diversification has evaporated for many and they are back to focusing on business as usual.

4. New rental and property models

Undoubtedly the e-commerce stream has gone from strength to strength and every business must now include this in their thinking and offering. What we have not seen over the past year is any major re-calibration of commercial rentals or property models.

5. Rise in entrepreneurship

I predicted we would see a renewal in an entrepreneurial spirit, largely driven by a rise in unemployment.

I got the unemployment driver incorrect, but unquestionably there are a growing number of people wanting to be in business for themselves.

They may not have been made redundant, but have decided they don't want to do what they have been doing and now is the time. This interest extends to franchising, which remains perceived as a safer option for first-time business owners.

In addition to what I did predict, there were a couple of significant trends that I did not anticipate and these are now having significant influence.

1. Labour shortages

With the prospect that we were facing a recession, labour shortages did not really factor.
However, a fuller than anticipated employment rate and perhaps more significantly, immigration policy, means that almost all business sectors and industries we speak to have labour issues or concerns.

Franchising is not exempt from this and I am aware it is hampering many businesses and systems, both on an operational day-to-day basis and from a growth perspective.

2. Inflation and supply shortages

Just this month we have seen the release of the highest inflation figures in over a decade, but there are few businesses that would have needed this to be aware that costs of literally everything have escalated over the past nine-12 months.

Added to this are international supply and supply chain issues.

Read: Should I purchase a greenfield or an existing franchise?

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We love the Brands (and people) we work with....

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Choosing a Master

Two additional and significant benefits of acquiring a master versus developing a franchise are the speed to market and the lower establishment and ongoing development costs.

Some of the best-known franchise brands, and nearly every international franchise brand in New Zealand, will actually be master franchisees operating under a master franchise agreement.

The holder of that agreement – the master franchisee, has the rights to operate and develop franchise business units themselves, and or to develop a territory and appoint sub-franchisees under that brand and system. Master franchise agreements can be regional, such as a province, or national.

What are the benefits of purchasing a master?

Acquiring the rights or purchasing a master franchise provides the master with many of the same benefits of buying a franchise system, but usually at only a fraction of the cost of acquisition.

As touched on, many of the masters operating in New Zealand are large, extremely well-known international brands, that in addition to brand power will have proven systems, access to unique products or services.

Two additional and significant benefits of acquiring a master versus developing a franchise are the speed to market and the lower establishment and ongoing development costs.

The franchisor may develop products, services and systems and the master will have access to these as part of their agreement, again most often faster and at a lesser cost than developing themselves.

Are there any drawbacks?

There are a few drawbacks – or I would suggest considerations or limitations – with acquiring and operating a master franchise.

The first and significant limitation that needs to be acknowledged is that the master franchisee does not own the intellectual property. In most cases this will extend to any locally customised or developments to the intellectual property.

There are of course ongoing fees that need to be repatriated to the franchisor. These need to be carefully assessed to ascertain whether the model is sustainable for each of the parties, franchisor, master franchisee and potentially sub-franchisees.

In the case of importing international brands or systems, how appropriate is it for the New Zealand market, is there a consumer demand and will there be demand for sub-franchises?

Lastly, consideration needs to be given to the term or length that the master franchise agreement.

If the master does not have renewal rights they do risk developing and growing a system which ultimately will return to and for the benefit of the franchisor.

Who would a master franchise suit?

Who is likely to acquire a master franchise, and or who is best suited to acquire and operate one?

The first group, and one that we see often in New Zealand are existing franchisors, existing master franchisee and or brand operators.

They understand how to develop and operate brands and systems and they often look towards masters as a way to diversify, take advantage of developing trends or grow their overall business beyond market limitations of the brand(s) they already operate.

The second two groups are less prevalent in the New Zealand market, but I am going to suggest them as the franchise sector develops and matures will increase.

The first of these are existing or experienced franchisees. Usually, they will have operated as multi-site or multi-unit franchisees and are looking at a way to further grow using their experience of operating with-in the guidelines and provisions of a brand.

Critically different to operating as a franchisee, if they are able to sub-franchise they will benefit from the initial and ongoing fees from the sub-franchisees without having to allocate the resources to developing and operating the business unit.

The last group of potential master franchisees, and again one that we are only just starting to see in the New Zealand franchise sector, is private equity groups.

Private equity groups can be strong candidates as their usual business model is a growth model, they often have well experienced management and leadership teams and critically they have the capital that is necessary to truly take advantage of and develop using master franchisee rights.

Read more about Franchising: Should I purchase a greenfield or an existing franchise?

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What are the fees and where do they go?

Franchise Fees ...

A conversation with a client prompted some discussion, in particular what does a franchisee get for their fees and are they good value?

A recent conversation with a franchisor client prompted some discussion and reflection on the franchise model, in particular what does a franchisee get for their fees and are they good value? These are really good questions, and usually the first asked by any potential franchisee after, how much does it cost to purchase?

The answer to what are the fees, varies depending on the industry or sector, and the particular system. But we can look at the typical fees associated with a food and beverage franchise as these generally sit with-in a range. We can then look at where do they go, and what do you get for the fees?

Initial franchise grant fee

This provides the franchisee access to and use of the intellectual property including systems and processes, branding and of course any proprietary products. Generally, these range from $30,000 to $50,000 depending on the system and what is called the initial term, or the period of the franchise agreement.

In my opinion, even at the higher end, this is extremely reasonable and by no way captures the collective cost of developing the franchise system and know-how.

For most systems to get to that point they have invested heavily over a number of years, tested, refined and proven systems and processes and the initial franchise fee is a mere fraction of what it would cost an individual to actually duplicate.

Training fee

A key part of buying into a franchise is learning the business and training a new franchisee is a franchisor's core task. Sometimes a training fee or component is included in the initial franchise grant fee or sometimes separated out as a separate fee.

Good franchise systems invest very heavily in their training programs from both a system and on a personnel basis.

Rarely could the training fee be considered a revenue generator for the franchisor. At best a training fee or allocation from the initial franchise fee is cost recovery.

Where a franchisee buys an existing franchise, they usually pay a training fee to the franchisor. But bear in mind this is not actually growing the number of franchisees or business units.

Ongoing royalties

For most food and beverage systems, the ongoing franchise fees or royalties are based on a percentage of revenue or turnover.

This ranges from a very few systems as low at four percent through to seven percent, with the majority in the middle.

What do you get in return? In absolute terms, this will depend on the system, but will include ongoing access to system developments, group purchasing, which in itself may offset the franchise fees, support and guidance and most importantly use of the brand, recognition of which may be a massive revenue driver.

Group marketing contributions

This is sometimes referred to as Ad-fund. It's important to remember that this is not revenue for the franchisor and they do not directly benefit from it. It is spent on behalf of the franchisees to increase revenue in their businesses.

The franchisor indirectly benefits from an associated increase in revenue through any franchise fees.

Percentages range from two per cent through to perhaps six percent of revenue. Not bad when the old rule of thumb is that you should allocate at least five percent to marketing your business, and they the individual franchisee units benefit from the collective group spend, which is what makes it so powerful.

Technology, systems and special fees

Some systems have either one-off development fees, or special fees to cover the costs of specific technology or systems, are perhaps a specific development program.

Again, these are not usually revenue generators for franchisors and generally offset specific costs in the system for the franchise business units.

And again, in many or most cases the costs may be far lower than what an independent business operator would have to pay.

Are the fees good value?

In my opinion, as a general framework, yes absolutely these fees are good value and they will usually represent a percentage of the costs of an independent business unit to recreate what is provided.

But ultimately answering the question of value will depend on the franchise system, how well-developed and supported it is, whether it has good systems that create quasi-value for the franchisees and associated cost savings and whether or not it has a marketing programme that generates return via increasing brand awareness and sales.

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Validation or Excuses?

Whilst interest in becoming a franchisee entrepreneur is on the rise, we know this will not suit everyone, we suggest robust due diligence process..

Whilst interest in becoming a franchisee entrepreneur is on the rise, we know this will not suit everyone and, as always we strongly suggest a robust due diligence process is undertaken.

However, we are seeing some trends in what people are raising as reasons to not pursue business ownership and I think it's time that we called them out as they often confuse excuses with due diligence and validation.

We will wait and see what happens with Covid

High on the list – if not the top reason that potential entrepreneurs use to rationalise not pursuing a franchised business – is the uncertainty around Covid-19. In fact, every time we have a change in Covid alert levels we see candidates instantly drop out of the process.

The pandemic has created uncertainty, but we are now definitely living in a new normal for now. We have seen the impact of lockdowns; in business we have seen winners and losers and we have some view forward.

But, unquestionably, the world is not going to return to what it was before Covid-19, so waiting for this to happen will be an unending exercise.

High on the list – if not the top reason that potential entrepreneurs use to rationalise not pursuing a franchised business – is the uncertainty around Covid-19.

The due diligence questions should include; what are the opportunities with this particular systems, industry or location driven by the new normal, and what will they look like in the future? How is the system or industry that I am looking at going to be impacted by potential further lockdowns or disruptions?

The economy may take a downturn

Also high up the list of justifications is citing that the economy may trend down. Recently released December quarter results are sure to see this issue raised more frequently.

This isn't a new justification and one I always find fascinating for several reasons.

The economy does go through cycles, so regardless of where it is at any moment, during the life-time of a business it will be exposed to an economy in both growth and decline.

Additionally, and importantly, not every business, system or industry fare the same in different periods of the economic cycle.

What is important is to understand is the history of and/or what's likely to happen over the cycle in terms of impact on the business, system or industry under review.

As we have discussed previously, some businesses do extremely well during downturns.

Unquestionably there are opportunities and risks over the entire cycle, and being worried only over a decline I would suggest is potentially myopic.

Not sure the timing is right

Absolutely, the timing to start or purchase a business needs to be right for the individual, and there are a number of factors to be taken into consideration.

However, many potential franchisee entrepreneurs fail to fully evaluate whether franchising generally or a particular business is right for them, citing the timing.

In my view, it is basically a lazy excuse for not completing due diligence. Are they addressing the real question, namely, is it right for them?

Firstly, if it is truly and solely a timing issue, the buyer may return to it in the future.

Secondly, due diligence can take anywhere from a month to over a year depending on the system or business so an individual's and of course other circumstances could change significantly over that time.

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Should I purchase a greenfield or an existing franchise?

Should a franchisee entrepreneur purchase an existing franchised business or a greenfield/start up franchise?

One of the first considerations for the franchisee entrepreneur is whether they should purchase an existing franchised business or a greenfield/start up franchise?

There is of course no universally correct answer and it depends on the individual buyer, their appetite for risk and their business ownership objectives.

The traditional paradigm has been relatively easy to understand.

The arguments for buying an existing franchise business

An existing franchised business has performance history. A potential purchaser can look at and analyse the performance and make some relatively sound projections around their likely performance moving forward.

Where the franchise component is so important is that a potential franchisee, as part of that analysis, can look at the particular business unit or franchise and evaluate it against others in the system, or the benchmarks – is it performing well due to the franchisee or location? Could they do a similar or better job?

This can also help with funding as history can be referred to. For many, they consider it a safer purchase option.

Even an underperforming franchise can and often is the preference as the price may be less than replacement or establishment costs and may also allow an incoming franchisee entrepreneur to quickly and relatively easily increase goodwill and generate a capital return.

The potential downside for buying an existing franchise business is, of course, how much is the incoming purchaser paying for goodwill?

A more difficult evaluation is how much of that goodwill can be attributed to the particular franchisee versus the brand, and if and by how much this may be eroded.

The arguments for buying a greenfields/start-up franchise business

The ability to generate goodwill versus purchasing it is usually the major driver for establishing a greenfield franchise business.

Usually this means that a start-up is less expensive to purchase than an existing one – particularly a profitable franchise business.

Not surprisingly, the franchisee entrepreneur that is more confident in their abilities and or has a higher risk appetite is likely to lean this way.

The downside of establishing a greenfields business are of course the unknowns – how long will it take to get to breakeven and beyond, what is the magnitude of the opportunity or business?

A less confident franchisee entrepreneur may also be concerned around their ability to build and grow versus maintain a business.

Challenging the traditional paradigm

In the current environment, you are unlikely to be surprised that an overwhelming number of new franchisee entrepreneurs are focused on purchasing an existing franchise business.

Subscribing to the traditional paradigm they are seeking to see history and proven performance, in particular how the businesses have performed over the past six to 12 months.

"The ability to generate goodwill versus purchasing it is usually the major driver for establishing a greenfield franchise business."

It could be considered risk-averse behaviour, but I would suggest that there are several new factors that need to be taken into consideration and perhaps challenge the traditional paradigm.

For example, has the disruption of the past year finished?

The old cliché that past performance is the best indicator we have for the future may no longer apply.

Disruption to some sectors like inbound travel is obvious and acute, but what about businesses that have traded well or even up over the past six-to-12 months – are they still to have their disruption?

Or what about those franchise businesses in either a category of location that have been impacted: will and when will they trend upwards?

How about completely new business concepts where there are no existing businesses for resale?

I do believe that there will be ongoing changes to consumer behaviour, how and where money is spent, category changes, new trends and whole new franchise business opportunities.

These will be both geographically in markets where there may not be existing franchise units and or in completely new markets for new products, services and systems.

So, to answer the question of "Should I purchase a greenfield or an existing franchise business?" the traditional paradigm remains, but it can certainly be viewed through some new lenses.

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Why these could be the Golden Years for Franchisors


Why these could be the Golden Years for franchisors - Bay of Plenty Business News

What about the prospects for franchises themselves and also companies, concepts and business that are considering growth via a franchise model?

I have previously written on when is a good time to purchase a franchised business and asserted that post Covid lock-down, we could see a renewed interest in entrepreneurship through franchising in New Zealand. But what about the prospects for franchises themselves and also companies, concepts and business that are considering growth via a franchise model?

am going to go out on a limb and say 2021 and beyond could be the golden years for franchise development and growth.My reasoning is based around two fundamentals and the factors influencing these: the first being the franchisee market and the second being the economic and social environment.

Without a question the single most referenced and actual challenge to growth in a franchise model is being able to recruit franchisees. Franchisees are the consumers or purchasers of the business model – without them there are literally no franchises.

Significant increases in franchising

We are not at all surprised that in late 2020 and into 2021 we are seeing significant increases in franchisee enquiry.

Over 2020 I outlined what I believed would influence this trend.

This included record high property prices and low interest rates, regional migration, returning expatriate Kiwis and structural employment changes, either forced by redundancies or via personal choices and those seeking lifestyle changes.

The combined effects are filling a franchisee pool to levels that I have not seen in New Zealand in my 20 years of franchising.

Current or potential franchisors may have potential customers, but equally economic and social environment are also ripe for growth.

There is almost daily commentary on record low interest rates and high property prices.

Rising property prices are great if you have or are selling property, and as discussed, if you are borrowing against equity.

Lower interest costs present the opportunity for franchisors or would-be franchisors to have the ability to invest in business units, test innovation and development and/or pass the reduced costs through to franchises by altering traditional fee or cost models.

Rising property prices are also driving down returns from rentals and smart investors will inevitability start to look elsewhere.

Franchise business models that can demonstrate good returns will be desirable and effective investment vessels. This can assist with fuelling growth, and every system needs to grow and get to a certain size to be viable.

Surprising rebound for economy

The New Zealand economy's surprising rebound in late 2020 no doubt has pleased business. Many areas that we are seeing spending happen to have strong franchise brands or sectors.

Whilst conditions for business growth may generally be promising, there is one last and significant reason why a franchise model may fair better versus a corporate model over 2021 and beyond. There is a real and significant limitation on labour supply.

With continued border restrictions adding to the pressure, there may just not be the labour supply for continued growth under a corporate model in many sectors.

Conversely, by the nature of the relationship, franchising re-allocates the responsibility of labour attraction and retention to the franchisee, and in many cases the franchisee provides the labour.

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Celebrate World Vegan Day everyday at Lord of the Fries


Vegetarian Restaurant Franchise | Lord of the Fries

Tired of sacrificing your integrity to an employer who doesn't reflect your values? Take charge of your career by purchasing a Lord of the Fries franchise. LOTF promote high ethical principles and are 100% plant based. Run your franchise business knowing that you're doing your bit for the environment and your health and wellbeing.

We have seen a huge shift in focus and attention in main stream media about the health benefits of reducing the consumption of animal products in our everyday lives. Many more people are embracing the health, wealth and world benefits by switching to a plant based, vegetarian or vegan lifestyle. This type of eating is becoming very popular for varying reasons: improved health by avoiding animal and dairy products; strongly held ethical principles for increased animal wellbeing; the impact of animal food production on the environment; to save money as meat/dairy/fish/egg prices increase; or perhaps people just choose a different lifestyle now.

Lord of the Fries (LOTF) is offering franchises throughout New Zealand to investors who really want to make a difference, already love LOTF products or perhaps someone who wants to start a business in a popular sector. Their menu is 100% plant based, 100% vegan, halal and kosher certified – and it's 100% delicious too!

Popular fast food chains usually only provide limited vegetarian or vegan options. Lord of the Fries' food is quickly gaining traction with sites now open in Auckland, Wellington, Queenstown and Australia. There is massive demand for LOTF franchises in all the regions of New Zealand.

We understand that you don't want to compromise your integrity running a business and that the values and service of an organisation are just as important as the bottom line. This is one fast food chain that should satisfy your requirements as well as provide alternative fast food options to New Zealanders.

Like their business name suggests, Lord of the Fries cook their potatoes in non-gmo cottonseed sunflower oil blend and are 100% plant based without any chemicals or preservatives. Although some vegans don't enjoy meat substitutes, LOTF create specular burgers and other 'meat' dishes with a variety of plant products. Their food appeals to previous meat eaters so they can get their fried fix that tastes like the real thing but is a slightly healthier option (well, it is still fried food).

Plant Based and Veganism has been growing in popularity so this is an ethical and profitable market to enter by purchasing a Lord of the Fries Franchise. LOTF truly believe that the food they create will make a real difference to the world and help people transition to more of a plant based diet over time.

Lord of the Fries is in it for the long haul, want to join them and change the world with one vegan burger at a time? Your passion for delicious plant based fast food, strong leadership skills and great business knowledge would be a perfect fit for a Lord of the Fries Franchisee.

#vegan #plantbased #halal #franchise #ethical #businessforsale #franchiseopportunity #businessopportunity 

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Your Journey Into Business

Aron Fuller admits that a year ago, he was 'completely green' about franchising. 'I understood the fundamental idea, but I'd never looked into how it worked – the costs, the fees, the contractual stuff. Now I am about to open my own Mexicali Fresh franchise in Christchurch!'

Aron had help with the process from two highly-experienced professionals, Nathan Bonney and Meredith Taylor from Iridium Partners. Nathan has over 19 years' operational experience in franchising, with a passion for business development and helping individuals succeed. Meredith is a Human Resources professional with over 20 years' experience of helping people into the right roles in all sorts of industries.

'I'd been keeping my eye open for an opportunity, but didn't have anything specific in mind,' says Aron, who worked as a bar manager on his OE before a long career in sales. 'But I love Mexican food and, when I saw that Mexicali Fresh were looking for a franchisee for Lincoln, I decided not to let it pass me by. I contacted Nathan and we got together, then he took me through the costs, fees, revenue projections, the whole thing, so that I had a clear understanding of the business.'

As part of the process, Iridium also arranged franchisee compatibility profiling to check that Aron would be a good fit as a franchisee and would have the skills and temperament required to run a busy restaurant. 'I found that reassuring,' says Aron. 'It confirmed that I had a good shot at this and wouldn't be wasting my money. And, just to be sure, they recommended a specialist franchise accountant so I would have independent verification.'

Making the match

Nathan and Meredith say that Aron's experience is quite common. 'A lot of people don't have much understanding of franchising or the sort of businesses that are available when they first contact us, so our first role is to understand what they are looking for and what their transferrable skills are,' explains Meredith. 'What have they done before, what do they enjoy doing away from work, what's their family situation, what's important to them? What are their passions and what are their fears?

'Then there is suitability for franchising. Do they want a job or a business? Are they able to follow systems? They might enquire about a food business, but be more suited to home services – or vice versa. And even within the food sector, which franchise would best suit them? It's a journey we take you on to help you find the business that is right for you.'

While Iridium represents some top brands directly, they are also happy to work with any credible franchise. 'If a brand or category really appeals to someone, we will get details and help them through the process,' says Nathan.

'Good franchising isn't about selling the most franchises – it's about matching the right people with the right opportunities.'

A whole new world

For Atinesh Kumar and his sister Ashika Pratap, meeting Iridium could turn out to be life-changing. Atinesh owns a security business, and when Ashika started looking for something of her own after almost 15 years of nursing, he thought he would invest with her and they opened an LJ's franchise in Tauranga.

'I've always enjoyed LJ's fish and chips, so I emailed them one night and Nathan came back to me straight away. We arranged to meet the very next day. We had several sessions, learning more about the business and the costs, what makes a good franchisee and so on, and he arranged for us to meet the franchisor too.

'The profiling process reassured Ashika that she had lots of transferrable skills from nursing management, and she has always enjoyed cooking, too. We opened in Bethlehem in September and it's been going very well.'

So well, in fact, that Atinesh asked Iridium to find another franchise opportunity for him. 'I have managers in my business, so I thought I could invest my time better. Nathan has found us a major opportunity to take over five Sal's Pizza stores in Canterbury, with the option to open more. I love the South Island, so I'm planning to move there for training and to get the growth started.

'Iridium are always professional, always helpful, always quick to respond. Nathan and Meredith are really lovely and know franchising inside out. I only met them in June and I'm already giving them more business – that says it all.'

Find something you love

Nathan says, 'We are a specialist company offering a very personal service. Because we know the market and we're not affiliated to any of the large brokers or advisors, we can work with anyone, lawyers and accountants included. Our recruitment lens to franchise sales places a focus on putting the right people together on a project, which is very important for future success.'

Meredith sums up. 'Buying a franchise is like dating – you have to meet the right people, then you have to work out if you're right for each other. By using Iridium, you'll be guided through the whole journey to find something you love, and something sustainable. Contact us to find out more.'

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Let your imagination run free in the great outdoors

Fancy yourself a bit of a designer who gets excited when someone mentions pergolas or landscape design? We have the perfect franchise for you working on projects that could include outdoor lighting/paving/pools/pergolas right through to the one-off essentials such as fences and driveways. Let your imagination run free in this exciting franchise especially tailored for landscaping lovers.

Are you gazing out of the office window right now itching to get back into the outdoors? If you purchased a Zones Landscaping franchise you could run a profitable business creating and developing a variety of dream landscapes for your clients.

Zones Landscaping provide a wide variety of outdoor projects from landscaping of gardens/lawns; creation of outdoor rooms/pergolas/kitchens; installing walls/fences/pools/driveways/paths; and general maintenance including water systems, power and lighting. The design potential for outdoor spaces is endless so if you can imagine a sculpted sanctuary from a square of scrubby grass then this franchise will be perfect for you.

Around 30% of costs are wasted in standard residential renovations according to BRANZ therefore the Zones Landscaping online project adheres to timeframes and budgets as much as possible. At the initial briefing meeting with your clients you'll inspire their ideas and create the concept design plus estimate costs. Once the plan is agreed there will be detailed design, planning and costing followed by the build stage and maintenance programme.

Kiwis live almost entirely outside during summer and many would love to have a suitable outdoor entertainment area so the capacity for clients throughout New Zealand is immense. Our outdoor spaces are precious to relax and entertain in, especially this year when people can't travel overseas freely or as often as they may have. Many property owners are investing in indoor/outdoor renovations and alterations so it's the perfect time to get started with your franchise and grow a solid client base. In turn, they will provide word of mouth referrals (which are essential in New Zealand) to help grow and expand your franchise. If you can inspire your clients with additional options via the full remit of the Zones Landscaping catalogue imagine how rewarded you would feel viewing your completed projects. Are you getting the same satisfaction in your current role?

Although Zones Landscaping can create dream spaces for their clients there will always be the need for practical outdoor options such as fencing, gates, driveways, paving etc. The beauty of this franchise is that it will suit most clients' budgets and requirements. If can dream you can create - contact us today to find out more. 

#landscaping #outdoors #gardens #driveways #fences #pools #decks #rainwatersytsems #retainingwalls #BBQarea #patio #deck #beyourownboss #selfemployed #flexiworking #franchise #franchisee #franchiseowner #franchiseopportunities

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The "soft" Due Diligence checklist


The ‘soft’ Due Diligence checklist - Bay of Plenty Business News

When we are guiding potential franchisee entrepreneurs there are three key areas we suggest they consider.

As we relax into summer, not only is it the season of family get-togethers and beach barbeques, it is traditionally also the period where many consider their future, how they avoid going back to work in their old jobs in the New Year and what sort of business they should buy.

As the end of 2020 approaches and we enter 2021, I suspect there will be a few more people thinking seriously around whether a franchised business is the option for them.

In previous articles I have discussed the various approaches in regard to due diligence, most recently suggesting that a potential franchisee entrepreneur should start with a motivational analysis, i.e. asking themselves "why" they are looking at buying a franchised business.

My assertion is this is going to assist in guiding a potential purchaser as to what types of businesses they should be looking at. But once they have done this, what are the other "soft" non-financial or legal due diligence items?

When we are guiding potential franchisee entrepreneurs there are three key areas we suggest they consider.

How much time do you want to spend in the business versus on the business, can you manage a business where you may get phone calls at any time any day, or do you need a business where you can compartmentalise your time?

The work-life balance

After all, the elusive work-life balance is the reason that many purchase their own franchised business. In many cases, it's true, you could go for a surf during the day or watch the kids play sport, but the reality is it's going to be your business, and ultimately there is no work-life balance, balancing work being really a part of your life.

The questions then are, how much time do you want to spend in the business versus on the business, can you manage a business where you may get phone calls at any time any day, or do you need a business where you can compartmentalise your time? Are you required to be in the business every day, and for how long?

From my experience, perhaps the number one issue that franchise business owners become dissatisfied with or more importantly, are not successful at, results from them misunderstanding, or mis-estimating the amount of time and effort required in running a business.

Family involvement

The motivation for many in purchasing a franchise business is to spend more time with the family in a family business.

It may come as a surprise that, according to the Franchise Relationship Institute, this motivation is actually inversely related to statistical business success rates.

The due diligence questions here are: have you worked with your spouse or family before, and how will you structure the business?

What will the respective roles be for each family member, how much time and attention will they be required to spend in the business.

And of course, what are the expectations from each family member in terms of remuneration?

People involved with the brand

The cliché is that being in a franchise business is being in business for yourself but not by yourself. This is reassuring. But a franchisee entrepreneur needs to take into consideration the other parties that are associated with the "not by yourself" part of the business. These include not only the primary franchisor and the key franchise support team members, but also other franchisees.

All of these people will have varying levels of contact with the franchisee entrepreneur and impact on their relationship with the brand. This impact can extend to other franchisees and how they manage their own business and represent the brand.

The due diligence process here is to speak to as many people associated with the brand as you can. Do so at the brand or head office level, and also at a franchisee and perhaps former franchisee level. Can you work with these people, are they competent, are they doing a good job by the brand that you are looking at investing in? Can you see yourself doing what they are doing?

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Time to renovate your career?


Refresh Renovations franchise for sale

Refresh Renovations Franchise opportunities,
Buy a Franchised Home Renovation business

The long summer break is well and truly underway and it's likely that renovations will be all guns blazing throughout New Zealand. We are a nation of DIY fanatics and Kiwis love visiting hardware shops and altering their homes. DIY is great for the simple jobs, but if more complicated renovations are required it pays to call in the experts.

Have you ever considered owning a business that specialises in renovations? Worried that you don't have the technical skillset to take on a Renovations franchise - Don't worry if you have no knowledge or trade experience as the Refresh Renovations franchise systems are well established and assist you to confidently project manage the renovation whilst taping into the resources required to do the "doing". Their systems simplify the consumer experience and budget by carefully planning and managing each stage through to completion. This creates a strong foundation for all projects to be cost-effective and accurately priced from the beginning. They are a one-stop shop for all domestic renovation and refurbishment requirements and save their clients' money.

Refresh Renovations are offering franchises to interested investors: perhaps people who have a passion for renovation; or would like to start their own business; or even launch a new career. This is the perfect opportunity for people returning to the workforce to focus their passion, people management skills and strong sales/marketing focus into developing their own Refresh franchise. If you're a hard worker there is potential to grow yourself an exceptionally successful renovation business.

You may not have considered a renovation franchise before; it's not a well-known franchise option. But in this land where people are building up, out and underneath their houses there are many future clients waiting for your team to transform their living spaces into something remarkable. Sure there will be competition from other refurbishment/renovations/building companies, however many of them aren't supported by a worldwide, highly reputable brand like Refresh Renovations. By purchasing a Refresh Renovations Franchise you will join a booming and highly profitable industry.

Are you going to wait another month to activate your New Year's resolutions or get a head start on other prospective business owners by purchasing this franchise and beginning 2021 with an exciting new future ahead of you?

Contact Iridium Partners now to learn more about Refresh Renovations franchises. 

Please note, there are also franchising opportunities with Refresh Renovations' sister companies Zones Landscaping and Oncore Maintenance. Iridium Partners have further details.

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Motivational analysis required before buying

There has been a significant rise in the number of people interested in purchasing their own franchised business in the current Covid-19 economic and social environment.

have previously stressed the critical importance of potential franchisee entrepreneurs undertaking thorough due diligence of the opportunity, including engaging specialist advice from accountants, solicitors and bankers.
We are now seeing a large proportion of first-time business owners, and as such there is an additional level of due diligence required.

However, I'm not talking about the due diligence that can be undertaken or outsourced to the specialist advisors. It's not an in-depth evaluation of the market or the brand. It is far more personal and closer to home – a self-examination of one's motivations for embarking on a journey of franchise ownership.

At the heart of this is a need for what I call a motivational analysis. A good place to start is with Simon Sinek's "Start With Why". Reading the book or just watching the 18-minute TedTalk will provide you with a general overview of why some are extremely successful when others are not.

The same philosophy and approach can be applied to make better decisions when buying into a franchise system and create better outcomes for entrepreneurs. In essence you need to look deeply at why you are wanting to acquire a franchise business.

Map out motivations

By looking at the profiles of franchisee entrepreneurs, we can map out their likely motivations and create a matrix of the type of franchises or business that will speak to their "why" and help you examine your own motives.

There are two most common profiles, so let's look at the kinds of franchise formats that tend to suit each of these. The first group can be called "Plan B-ers".

This group can typically include the recently made redundant, and those returning to work post children. Now, it can also include those who have had a taste of self-determination during lockdown and want to go it on their own.

By looking at the profiles of franchisee entrepreneurs, we can map out their likely motivations and create a matrix of the type of franchises or business that will speak to their "why" and help you examine your own motives.

Their backgrounds will be varied as their skillsets. What is common with a majority of Plan B-ers is inherent in the title – this isn't their first choice, so many will be looking to buy a job and/or some security.

For some of this group they will use the opportunity to make that career diversion into something they always wanted to do. However most will be looking at playing it safe. The safest and most comfortable path for Plan B-ers is to look at their core skill and experience sets and apply these to a franchise structure.

They are usually risk adverse, so well-structured, established systems will suit them best. This could be systems designed around a professional service such as HR, accounting or perhaps property management, if from a professional background.

Home services and or trade-related options may be sought by those from the trades, and perhaps retail franchises if they are from hospitality or retail backgrounds. Other options or systems that have earning guarantees or income protection will be very desirable to this group.

The second group can be described as Twilighters – people looking towards, but not quite ready to retire. Three factors come into consideration with this group.

Preservation of capital is usually paramount, so key issues include how much the system is to buy into, and how safe it is as a business. Their general objective is likely to be protecting an asset base that has been created over a lifetime of employment.

The second consideration is around earnings expectations. Quite often, the motivation for Twilighters is not solely income, but more a desire to stay involved and have a business interest.

The third consideration is much more practical – what's involved with running the franchise, how hard is the work, and how much time is involved to run it successfully.

Combining these three objectives at various volumes produces a match with systems that are generally at the lower investment level, and often those that can have hours and attention varied to suit.

Alternatively, for the well capitalized franchisee entrepreneur, secure high performing capital systems are also a consideration, key factors being their ability to be operated under management and or the ability to on-sell.

We have touched on just two of the why profiles for potential franchisee entrepreneurs, but the commonality with these – or any of the other profiles – and the key to their success is to understand the motivation for purchasing a franchise and seek out systems that are able to speak to your "why".

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Whangārei needs pies!


Jesters Pies - Franchises for sale

Feed their hungry northern bellies with Jesters' Franchises

The humble New Zealand pie - our true blue, Kiwiana staple that permeates throughout NZ since a clever person decided to create a tasty meat filling and wrap it in pastry. Pies date back to the Pharaohs with differing versions recorded throughout the centuries. But Kiwis claim it as their own so they hold iconic status alongside pavlovas, chocolate fish and gumboots.

Jesters take pies very seriously because they realise it's an important part of our culture (full disclosure - Jesters Jaffle Pie Company actually started in Australia in 1997). However here in New Zealand Jesters have supplied Kiwis with high quality, inclusive (gluten free, vegetarian and vegan,) freshly baked pies with other tasty side options since 2002.

New Zealand's love for pies continues to grow.  So where exactly does Whangārei's population of over 54,400 people go to satisfy their pie cravings?

This is your excellent opportunity to provide delicious pies to hungry northerners by purchasing a Jesters' franchise in Whangārei. It's a simple business model with relatively low start-up and inventory costs. You don't even need to be a baker because the Jesters head chef creates delicious recipes for all the franchises. A further advantage to running this franchise is the capacity to provide catering as well as take the pies to the people of Whangārei in a Jesters' van.

What Jesters do ask from you is that you have management capabilities and great customer service skills along with a basic understanding of overall business and financials. In return, Jesters will support your franchise with all aspects of the business including marketing product development and merchandising. Jesters comprehensive training includes staff training; customer service; product knowledge; purchasing/inventory control; health and safety; accountancy/cash management; and management advice.

Whangārei is missing out on the best pies in the country so it's your opportunity to step up and make your country proud by supplying this national treasure! Contact Iridium for further information about purchasing the Whangārei franchise with Jesters. 

#whangarei #pie #pies #fastfood #lunch #catering #glutenfreefood #veganfood # vegetarianfood #fooddelivery

#beyourownboss #selfemployed #flexiworking #franchise #franchisee #franchiseowner #franchiseopportunities #creatinghappiness

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Be Your Own Boss with Diamond Fusion


FRANCHISES - Diamond Fusion

Become a Diamond Fusion Franchisee in your town and enjoy the benefits of being your own boss! 

Enquire Today!

Have you considered starting your own business but then started worrying about the initial costs and effort? Perhaps you don't know where to begin, and it just seems easier to stay as an employee with regular income and holidays. Many entrepreneurs invest long hours into their new company, often around their existing job until it becomes viable to move full time into their own company. But it's an exhausting process beginning with nothing and receiving limited returns.

You can generate a great income quickly by purchasing a franchise instead. There are many available including commonly known fast-food outlets. However, if Hospo doesn't interest you, then there are a variety of franchises with established and proven success already in the market. All the branding, marketing and business processes are complete and comprehensive training is provided to you. Don't forget the community of other franchise owners in your group to communicate and share business ideas with.

Have you heard about a glass treatment process that generates sparkling, easy to clean surfaces? Diamond Fusion is a world leading, highly reputable glass treatment for new (or stained) glass in showers, balustrades, pools, vehicles and boats. They have successful franchises already throughout New Zealand with further developments planned in Auckland, Christchurch and the other regions.

This is your unique opportunity to purchase a franchise with Diamond Fusion NZ. Although they have concentrated on shower glass, you are more than welcome to generate new business with other sectors that have glass surfaces such as automotive/marine sectors, tourism and construction. 

#beyourownboss #selfemployed #flexiworking #franchise #franchisee #franchiseowner #franchiseopportunities #cleaningservices #showerglass #buisnessforsale

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Emerging trends and opportunities

Towards the end of each year I write on what I see as the emerging trends in franchising for the coming year. If 2020 has taught me anything, providing predictions is a dangerous preoccupation, so this year I am going to keep the focus a little tighter and answer the question: in the current environment, are there opportunities in franchising?

The simple answer is yes. Let's look at the economic and social environment and then a delve into what sectors and specific industries are currently providing the strongest opportunities.

The economic environment

Generally, franchising is anti-cyclical to the economy. When the economy is upbeat, less people make the jump from paid employment and lower unemployment means there are usually less people looking to start their own business out of necessity.

The recession that followed the Global Financial Crisis (GFC) was unusual as unemployment did not rise as much as previous recessions. Our current recession has already seen an increase in unemployment and an increase in demand to buy into franchised businesses. Is it necessity or opportunity?

We have historic low interest rates, which look to be around for some time and the impact on business borrowing cannot be stressed enough. Adding to this that a significant amount of business borrowing in New Zealand is secured against or funded by equity in homes, the lower interest rates have a double whammy – ie, lower rates on both their franchise business loan and the home loan.

There has however for several months been some query around the banks' appetite for business loans and we are certainly seeing them be more cautious. However, franchises often provide more comfort for the banks due to lower failure rates, their ability to benchmark and they generally know what is and should be happening in a business at any time.

High property prices

The New Zealand mood lifts when property prices go up. The current runaway property market in Auckland in particular is raising some smiles for those already on the property ladder. These are often also the people looking to make the jump into a franchised business, so the triple whammy, added to lower interest rates is an increase in potentially available equity for many.

The figures for the amount of money captured in the New Zealand economy from Covid-related travel restrictions is quite incredible. In spite of the demise of international inbound tourism, in September the New Zealand balance of trade recorded the highest trade surplus in more than five years.

This is a lot of money staying in, and being spent in New Zealand that was leaking overseas. We have read the articles on high end cars sales going through the roof as people cannot take their overseas holidays. There is also a renewed sense of wanting to spend locally. We will come back to how this is playing out.
Promising industries or sectors

So with some of the economic conditions favouring business growth through franchising generally, where are the current hot spots and opportunities by sector?

Essential services

Basically, any services that were able to trade through lock-down have performed extremely well. However, over the past six months, one sector that has gone from strength to strength is cleaning and hygiene.

Traditionally seen as a low entry point franchise model, this category has seen massive increase in demand and opportunities for new franchisees.

As demand matures, brand and delivery will become that much more important and the well franchised, well-managed, marketed and reputable systems will further prosper.

This provides opportunities for not only new entries, but for independents in the industry, including larger firms, to join franchise systems due to high demand levels and benefit from brand awareness, which you could argue was previously largely irrelevant.

Online and on demand goods and services

Already a macro-trend of our times, this has been accelerated by weeks of us being locked at home. For the food and beverage industry this means models that have a strong delivery or pick up model and a technology and perhaps internal delivery platform to match. Sales continue to be strong and defy expectations.

Small footprint, suburban and regional distribution capabilities are also performing well. This bodes well for would be multi-site franchisees that have the capacity to capitalise on opportunities and spread future risk by operating across multiple sites and markets, or perhaps across brands.

Home improvement and renovation

Back to our closed economy comment, there is currently a massive increase in demand for home renovation and improvement services, and long-life durables. Franchised businesses and brands in this space are doing extremely well. In the case of property related, rising property prices tend to encourage people to spend more on refurbishments and improvements.


This year has demonstrated a need to be flexible in so many areas. For many individuals, this flexibility is a new-found interest in achieving a work-life balance. Looking towards franchised businesses that provide flexibility in working hours and/or location, such as a man in a van type business with relatively low ingoing cost, can provide such an option.

At the other end of the investment spectrum and the yet completely unanswered question is the future of CBDs and centralised work.

Flexible work space and decentralized work locations provide a huge opportunity for individuals and landlords. 

So yes, whilst we have some serious dark skies ahead of us, there are plenty of opportunities in franchising.

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Rise of the Franchisee Entrepreneur


Rise of the Franchisee Entrepreneur - Bay of Plenty Business News

How do we define entrepreneurship and what is its relationship with franchising? Let’s start with returning to the definition.

I remember my year 11 economics class and the subject of entrepreneurship; it was described as being "hard to define and even harder to encourage". It sounded elusive and counter to the field of economics where we generally like to be able to define our parameters for everything we study.

How do we define entrepreneurship and what is its relationship with franchising? Let's start with returning to the definition. It turns out my year 11 class was not wrong. Wikipedia allocates nearly 250 words to a definition which includes:

  • Entrepreneurship is the creation or extraction of value.
  • Entrepreneurship is the process of designing, launching and running a new business, often a small business.
  • Entrepreneurship is the capacity and willingness to develop, organise and manage a business venture along with any of its risks to make a profit.
  • The people who create these businesses are often referred to as entrepreneurs.

I am going to summarise and define entrepreneurship as a willingness to, or process of taking on commercial risk, developing and managing a business with a view of creating value, profit or return.

The misperception that franchising stifles entrepreneurship

We have conversations every day with people who want to start and grow their own businesses. They want to take a measured risk, invest time and money with a view of controlling their future and of course, make a return. Without perhaps saying it themselves, they want to be entrepreneurs. Those that have already decided that franchising is their route we call franchisee entrepreneurs. The statistics overwhelmingly demonstrate franchisee entrepreneurs are more successful.

Some budding entrepreneurs however have a misconception that franchising will stifle their entrepreneurial aspirations. I believe this could not be further from the truth, and invariably we have a discussion around recurring themes:

I want to own my own business, not someone else's

Nearly every franchise brochure or explanation that I have seen over 20 years starts with something similar to "be in business for yourself, not by yourself". This is true, franchisees fund – whether directly or through borrowings the business themselves, and the risks and rewards sit solely with the business owner, the franchisee entrepreneur. It is their business – it is not an outlet or subbranch of the franchisor's business.

I want something I can develop, control and influence

That is not solely, but it is ultimately in the hands of the franchisee entrepreneur. If it is a start-up or greenfield franchise business, they obviously need to develop and grow the business. If buying an established franchised business, there is always room to develop, refine and do better. And the best part about franchising is it provides the road map and the benchmarking against which success can be measured.

From over 20 years of research the Franchise Relationship Institute has established that one factor accounts of approximately 40 percent of the success (or otherwise) of a franchised business. It is not the brand, not the location (though both are critical), it is the franchisee.

I don't want to be told what to sell and I don't want to be stifled

Firstly, here is the wake up, "someone" is going to tell you what you should be selling. That "someone" is the "market" – if the market does not want it, you won't sell it. And why would you not want the collective experience, support and guidance of a franchise system to assist you with what you should be selling?

We also often hear people say they don't want their ideas or innovation stifled. Good franchise systems do not stifle innovation, they have the ability to develop, test and roll out innovation, often generated by franchisees. Need we say more than Big Mac – invented by a franchisee, now the greatest selling burger on earth.

I don't want to follow rules

Let's face it, we have rules in business – we must pay taxes, we must follow an extraordinary number of legislative requirements and we must perhaps most importantly, do the things, and follow the rules that will create profitable businesses.

Franchise systems develop processes and parameters, "rules" because they work. Some are designed to make sure the franchisee is able to stay within the legislative playing field. Whilst others are definitely to ensure compliance within a franchise system.

To quote one of my former franchisor managing directors: "The franchise agreement and parameters are designed to keep the good things in and the bad things out."
There is one statement that does separate the entrepreneur from the franchisee entrepreneur – I want to create or develop my own "thing".

These super brave people are politely called pioneers. I believe there is often a confusion between pioneering and entrepreneurship and while they are not mutually exclusive, they are not the same.

You do not need to invent, or revolutionise anything to be an entrepreneur. If you do want to be a pioneer, then franchising is probably not for you and we wish you the best of luck.

But remember that statistically, the franchisee entrepreneur is more likely to be successful.

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Opportunity Knocks

What do the expected recession and redundancies mean for franchising? Simon Lord and Nathan Bonney share some insights

Over the last 10 years or so, New Zealand has had a strongly-performing economy with low unemployment. Although many franchises have grown well as a result, the economy had a negative effect upon franchisee recruitment in some sectors. Increasing property prices made it attractive for people to invest in property rather than in themselves.

Add the fact that business confidence has been surprisingly low since the last election, meaning that people in well-paying jobs have been reluctant to make the jump into self-employment, and you can see why surveys have consistently ranked 'availability of good franchisees' as the number one challenge for most franchisors. Lower immigration levels haven't helped, either.

Well, now all that looks set to change. Traditionally, franchising has always performed rather well during recessions.

For good franchisors, recessions offer a chance to expand: new locations become available; old competitors suffer; and there is a larger market of potential franchisees and staff as people are moved out of declining industries.

For well-supported franchisees, being part of a franchise group offers benefits that an independent business can't: buying power; branding; support; new product or service development; and many other factors – not least, the ability to share ideas and opportunities with fellow franchisees. Truly, there is strength in numbers.

And while large companies struggle to reduce overheads and reorganise, or overseas companies leave the market altogether, the flat and localised management structure which most franchises enjoy means that they are well-placed to grow.

Back to the future

The recession following the 2008 Global Financial Crisis was unusual in New Zealand because unemployment did not increase as much as had been the case in previous recessions. The next few years look more likely to follow the normal post-recession pattern, with more growth opportunities and more financial stimulus following the inevitable initial pain.

Tragically, some franchisees (and many independents) will not have sufficient financial reserves to survive an extended downturn and their businesses will close or be resold. This means that there will be a number of otherwise viable franchised businesses which come on the market and represent good opportunities for those in a position to buy. Buyers will also have a choice of new opportunities and new sites.

The fact that most economists are currently tipping property values to avoid a major plunge in values, or to suffer only a temporary dip, means that people with property will still have equity against which to borrow. In addition, record low interest rates make it possible to borrow more than might otherwise have been the case (although they would be wise to build in a safety margin for rates to increase in the future).

Who's going to buy?

So who's going to buy, and where is the biggest growth going to come from? Well, redundancy is going to be a key factor. While it will affect people across all wage groups, investment levels and industries, a lot of jobs are going initially from the retail, hospitality and tourism sectors. These are people used to working long and sometimes unsocial hours, as business owners do. They also have people and communication skills, which has often been a challenge in franchise recruitment in recent years.

Some won't have a lot of savings, so home-based and mobile franchises and lower-investment opportunities will appeal. At the same time, there are others – pilots, managers, logistics experts – who will want white-collar or business-to-business franchises.

Another driver will be two-job families afraid of redundancy who want to diversify risk by one being self-employed in, say, the childcare, leisure or education field. Following your passion can be very rewarding in many ways, but anything involving compliance issues is difficult and costly to do as an independent – making a well-developed franchise much more attractive.

And franchisors face a new challenge in the form of a group who have rarely entered their orbit before as potential franchisees – millennials. It's only eight years since a demographics professor told a Franchise Association conference that our ageing population meant that millennials would never be short of a job. Now they are, and owning their own business is one of the options.

Wherever they come from, it's important to recognise that this will be Plan B for many people. They might have dreamed of buying a business before but not expected it to happen, or not intended it to happen right now. As a result, they may have good skills but no business experience, which makes a franchise very attractive.

Crossing the border

Immigration may have come to a halt for now, but the number of New Zealanders returning from overseas is increasing again. They will bring valuable skills and experience in many fields, but the lack of suitable jobs (or similar salaries) here may force them to look at business opportunities. Some of those who return will undoubtedly head back to complete their OE when things settle down again, but many will realise, 'We don't know how lucky we are' and decide to stay.

New Zealand's reputation as a 'safe haven' is sky high right now, so when the borders open again we can expect immigration to rise again. Just how immigration policy will be developed remains to be seen, but it can be assumed that migrants with investment capital will be high on the list. In order to meet visa requirements, they will probably have to show how they will create jobs, so larger-investment franchises such as accommodation and hospitality will be more attractive.

Already in the market

There are two other sources of franchise growth. The first is conversion franchising, where existing independent business operators join a franchise in order to take advantage of the brand, buying power and systems they need to help them meet new challenges. That can bring franchisors good new sites and good new people – although training them can have its challenges!

And existing franchisees may see the opportunity to become multi-unit operators. Good franchisees may already have the skills to turn around an under-performing or under-funded outlet, or see the opportunity in a new location. Beware though – multi-unit doesn't suit all business models or all franchisees.

Appealing to buyers

With lots of potential franchise buyers in the market at last, the challenge for franchisors is to attract, recruit and train the right people to build successful and sustainable businesses of their own.

In terms of making the opportunity more attractive to potential franchisees (and their advisors), some areas to consider are:

  • Reducing ingoings. Fit-outs, equipment and training all need to be designed to offer better value for money.
  • Lowering initial fees. While ongoing fees may need to be kept at the existing level to fund support services (which will be more in demand than ever), is it possible to lower or spread out initial fees? It might reduce the contribution to costs from franchise recruitment, but if it helps bring the right people on board for the long term, it might be an investment worth making.
  • Alternative funding options. Where good potential franchisees are struggling to come up with the necessary equity, what other options might be available? Joint ventures and various lease-to-own schemes have been used by many franchisors, while vendor capital (where the outgoing franchisee leaves some money in the business for an agreed period) is also possible with resales. Such options do have to be carefully considered with specialist franchise advisors, though, as any form of finance reduces the profitability of the business.
  • Work or income guarantees. Offering some form of guarantee can provide potential franchisees with some certainty when they first move into self-employment. However, such schemes can lead to friction if the terms are not clearly understood by all parties (see page 16).
  • Paid training schemes. Rather than a guarantee, some franchises provide paid training periods which help the franchisee cover the gap between leaving employment and the time their business starts to generate income.
  • Developing additional revenue streams. The pandemic period accelerated the acceptance of online shopping. Some franchises have developed online sales platforms that reduce overheads and share revenue with franchisees who deliver the product or service in their area.

Ready for the rush

For all the above reasons, we are already seeing a big increase in enquiries for franchises in certain sectors, and that seems likely to continue and grow in the coming months.

Franchisors therefore need to be prepared to handle greater numbers of enquiries than they have been used to in recent years, and to have the systems and processes in place that both help them identify good prospects, and ensure that all candidates receive accurate information in a timely fashion to help them make informed decisions. Good record-keeping and management of the recruitment 'funnel' is also vital for legal reasons.

While good recruitment processes will identify the right people, they will need to be matched by excellent training and support programmes to help new franchisees get up to speed and profitability as quickly as possible – whatever their background.

It will be the franchise systems that adapt best which will emerge from this period stronger than ever with a pool of committed, talented, well-resourced franchisees.

This article was first published in Franchise New Zealand magazine Year 29 Issue 2. 

Simon Lord is Publisher of Franchise New Zealand. Nathan Bonney is Director of Iridium Partners and has many years' experience in franchise operations and recruitment.

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How franchisors earn their keep, and their franchisee’s respect


How franchisors earn their keep, and their franchisee’s respect - Bay of Plenty Business News

Good franchisors have and are standing by with their franchisees in challenging times, often undertaking functions outside their contractual scope of works.

There are a number of traditional reasons why the pundits such as myself spruik the virtues of franchising versus a stand-alone or independent business model. Top of the list has to be the fact that franchised businesses have a higher success rate versus the independent business.

For many, that fact would simply be enough in itself. In my view the three core drivers of this statistic stem from brand, purchasing power and the superior systems often associated with a well-developed franchise system.

Factors such as the brand, market position and marketing allow a single franchise business unit to project itself as larger than it actually is, capturing market share, sales and profitability accordingly.

Group purchasing power harnesses the power of many, delivering to the individual business savings that ultimately translate to margin and increased profitability. And or the ability to be more price competitive and in turn capture market share.

"There are some roles that franchisors never anticipated that they would need to be undertaking, as the cheerleader, the resilience coach and the lifestyle coach."

Franchising is based on a model of doing or performing a business function, so it's no surprise that often a franchised business has operational and business systems and processes far superior to a similar independent business unit.

New approaches in Covid-19

In 2020, all of these elements are as relevant as ever and well-developed, well-supported franchise systems will almost certainly exhibit all three.

However, the pandemic and the ensuing market and economic disruption has created a need and opportunity for good franchisors to work with and for their franchisees and systems in some entirely new ways.

There are numerous stories and examples of franchise systems being able to innovate and implement change in a very short and challenging period.

Innovations have ranged from developing and introducing complete online shopping platforms, to virtual store and business meetings with franchisees, through to product and delivery "pivots" to either fill a revenue hole or capitalise from new market opportunities.

For bricks and mortar-based businesses the April-May (and now August-September in Auckland) lockdown, created literally an untenable situation for many including franchisees where they had rental obligations with no income.

The Government's complete inaction and flip-flopping has meant that franchisors have had to perform the role of tenancy advocate and negotiate with landlords, whether the franchisor held the head lease or not.

In many cases this has literally saved franchisees from going broke. I know many franchisors that have spent 100's of hours both publicly and privately advocating for their franchisees.

And finally, there are some roles that franchisors never anticipated that they would need to be undertaking, as the cheerleader, the resilience coach and the lifestyle coach.

Many franchisors during lockdown were quick to perform business-focused check-ins with franchisees, but as the lockdown dragged on, with no business, this check-in role developed into one of resilience coach, keeping in contact with the franchisees and their families to ensure they did not feel isolated and alone.

I have heard of group Zoom chats, after hours virtual drinks and even a franchisor that sent care packs to franchisees with young children, realising that between home schooling and limited purchasing opportunities, something new was going to quieten the masses.

The well-worn franchising cliché, "be in business for yourself, not by yourself" has never rung more true.

Good franchisors have and are standing by with their franchisees in challenging times, often undertaking and performing functions well outside their contractual and traditional scope of works.

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