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FRANCHISING YOUR OWN BUSINESS

by Philip Morrison,
last updated 07/12/2017

Philip Morrison provides an introduction to what you need to think about when franchising a business

Green Acres, the company that became New Zealand’s largest home services franchise, started off with one man mowing lawns in Auckland. From a single outlet in Ponsonby, BurgerFuel has become a publicly-listed company with outlets throughout the Middle East. Fastway grew from a man with two vans in Hawkes Bay to a multi-national courier and post company. Franchising made it all possible – but could you follow in their footsteps and franchise your own business?

Franchised business networks touch many different industries these days from retail and food to home services and business-to-business. Some are owner/operator businesses while others occupy vast premises with hundreds of staff and thousands of stock lines. The 2017 Franchising New Zealand survey by Massey University suggests that there are 631 franchise systems in New Zealand with about 37,000 franchisees employing almost 125,000 people and a turnover equivalent to 11 percent of the nation’s GDP.

It should therefore come as no surprise to learn that franchising can be likened to Joseph’s technicolour dream coat, with a vast range of inputs intermingled to produce the overall effect. What is appropriate for one industry is not appropriate for another; what works for one business may not work for another. That means it’s important to take professional advice to create a workable and sustainable business model. Over the years, we have observed many DIY-built franchise systems. These are often doomed to failure before they start, or underperform and typically give franchising a bad name.

Before you take money from someone else for a franchise, then, you need to invest some of your own money into developing a robust and sustainable franchise format. Use a consultant who has standing in the franchise sector, and beware – not all consultants are created equal. The first question to ask would be: ‘Are they a member of the Franchise Association of New Zealand?’

Where Do I Begin?

As the flowchart (below) suggests, the first place to start is with the business concept itself. Do you have a successful business already? You’d be surprised how many people with an ailing business think of franchising it as a way out of their financial difficulties rather than as a way to get themselves (and others) deeper in the mire. Or are you considering bringing in an overseas-based franchise business model into New Zealand?The Franchising Process - flowchart copyright Franchise Accountants Ltd

Pilot Operation

Either way, you’ll need a workable concept and a proper business plan before you develop a pilot operation. A pilot operation is essential to test systems, marketing, supply chains, service, pricing, margins, seasonality and all sorts of other essential elements. Part of establishing a pilot operation is also to try what works and find out what doesn’t, and to document the systems as they are developed. Sounds like hard work? Well, this is what future franchisees will be expecting to pay for.

Feasibility Assessment

Franchising is not a golden bullet to success in business. It’s one type of business model or configuration that a business can operate through but it’s not the only one; in some cases, a franchise business model may not be suitable. So is your business franchiseable? To find this out, you’ll need to get your advisor to undertake a franchise feasibility assessment. This is a structured approach that covers all the key components which determine how a workable franchise would be configured.

Just as going to war under-prepared can have fatal consequences, so going to market without adequate preparation can kill your business. The purpose of the feasibility assessment is to build ...

This article appears in full in the latest issue of Franchise New Zealand magazine (Year 26 Issue 4). Read the entire article in the digital magazine or, if you live in New Zealand please send for your free print copy.

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