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IMMIGRANTS DRIVING FRANCHISE RE-SALES

by Simon Lord,
last updated 21/03/2015

December 2015 - Broker says recent immigrants from China and India are the biggest buyers of existing franchised outlets

Recent statistics produced by Link Business Brokers suggest that some 68 percent of purchasers of existing franchise businesses are recent immigrants, predominantly from mainland China or India.  Link defines ‘recent’ as people who have immigrated to New Zealand within the last five years.

The figures are based upon sales made through Link over the six months to September 2014, although no sample size is revealed for reasons of commercial confidentiality. The company says that food & beverage retail is the most popular franchise type with this group, and petrol stations are also popular.

The statistics show that the average sale price for a franchise business sold in New Zealand increased by 11.2 percent over the preceding period, from $342,962 to $386,218. It should be noted, however, that this figure would relate to the types of businesses most commonly sold through brokers, rather than those sold privately, through the franchisor or to other franchisees seeking to create multi-unit operations. 57.6 percent of the sample was food & beverage businesses, with retail accounting for another 14.6 percent. Leisure & Education (7.6 percent) and Home Services (6.8 percent) were the next largest categories. According to the 2012 Franchising New Zealand survey, food and accommodation services accounted for just under 20 percent of franchisor numbers in this country.

Link estimates that around 25 percent of the sample are purchasing businesses to comply with visa requirements under the Long Term Business Visa or other schemes. They say that while buyers from China especially tend to be well-funded and highly-committed, some potential buyers are eliminated by franchisors’ requirements that franchisees have good English language skills and permanent residency. A 2012 study by the Franchise Relationships Institute found that franchisees with English as a Second Language performed significantly lower than franchisees with English as a First Language on all measures and suggested that franchisors wanting to achieve excellence need to consider how they recruit, train and support ESL franchisees. Recent changes in the way Immigration NZ applies policy may also make residency harder to achieve through franchising.

Overall, Link reports that the number of franchise re-sales has increased by 18 percent over the previous 6-month period, and franchise re-sales increased from 12.3 percent to 17.5 percent of all business sales. Figures suggest that the multiples being achieved on successful franchise brands have increased marginally, with Subway being singled out as enjoying strong multiples due to what Link calls ‘immense buyer demand.’

Franchising for Chinese Immigrants

‘If you have some assets, it’s always good to look at a business venture that will give you freedom to make your own decisions. In our culture, we think there is no future in being stuck in a job forever – in fact, the Chinese character for “job” is like a character trapped between walls.’

Read our special report on Franchising for Chinese Immigrants.

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