Franchising is on the rise in the New Zealand market – accounting for between 8-10% of our GDP and with an annual turnover topping $15 billion, according to the Franchise Association of New Zealand. So while times are tough for both franchisors and franchisees, it’s still a growing force.
A growing business force
Quantifying franchise growth is the aim of a major survey currently underway that will provide the first complete picture of the sector since 2003.
Led by Massey University with input from Queensland’s Griffin University and support from Westpac, it coincides with an Australian survey that will allow trans-Tasman comparisons.
Although results won’t be available until later this year, the survey is expected to show a sector growing at a significantly higher rate than the national growth rate.
It’s also one that industry pundits believe can hold its own through economic down cycles.
During times of uncertainty, a more structured business model has its advantages, notes Westpac’s National Franchise Manager, Daniel Cloete:
“At the moment retail in New Zealand is quite tight so people like to have proven models – they like to understand the figures and make performance comparisons. With franchises, you normally have a good idea of what the success factor is both for the business model and the product. Additionally, knowing what the rent should be – along with wages and gross profit – that’s really important in the current market.”
People from a corporate background find it a good environment to work in because, while they want their own business, they also want strong management information systems and a successful business model to back them up.
The fact that sales levels are challenging was highlighted in the recent (July 2010) Franchising Confidence Index. It also found substantial decreases in the sentiment associated with general business conditions, like availability of suitable staff, sales levels and franchisee operating costs.
But in a down cycle, well supported systems can do better than independents and that makes franchising look more attractive, says Cloete.
Westpac was the first bank to get involved in the franchising market 20 years ago and has retained market leadership both in terms of franchisees and franchise systems.
Its support of the sector hasn’t faltered during the recession, says Cloete. “There has been some concern around funding for business and franchises in particular. It’s true banks have tightened up on house lending policies because houses are not increasing in value at the same rate – but as far as the business figures are concerned, we haven’t changed our policies. If the business model is good with solid figures we’re more than happy to fund. We’ve proved that through the past 18 months. We’ve been open for business right through the recession.”
Got any questions or would like to know more?
Our Franchise team will be happy to help. Just visit www.westpac.co.nz/franchise or call 0800 177 007.
