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DUBIOUS FRANCHISE CONSULTANTS UNDER FIRE

by Simon Lord,
last updated 29/07/2009

May 2006 - A Nelson business broker has fired a broadside at incompetent franchise consultants

Writing in his newsletter Commercial Informer, Paul Thomas of Summit Real Estate says:

“There are a bunch of cowboys from a large North Island city who are selling the concept of franchising small business concepts. Yes, for $70,000 to $80,000 they come into your business and even stay at your home in some cases and dissect your business down to every minute detail.”

“They go back to Auckland promising to return with the recipe for wealth. In Auckland, they set about with the information they have and plagiarise their word processor and spit out volumes of hard copy in different categories along with discs.”

“I have seen examples of this “master work” and in my opinion they are so similar it’s laughable – along with the spelling mistakes.”

“The price to buy one of these THINGS in all cases I have seen is phenomenal. The franchise agreements have emerged from the ark and the ongoing costs to remain a franchisee are, well, let’s just say the budgets in the documents look good.”

“Footnote: They charge the franchisor a 20% fee for each franchise they sell, over and above the initial cost.”

Paul Thomas has 19 years’ experience in selling businesses throughout the Nelson province and was one of the first business brokers to become accredited in New Zealand. He distributes his newsletter to 600 lawyers and accountants in the Nelson region and told Franchise New Zealand magazine & website that he has never had as many comments from recipients before.

‘I believe the company in question are not members of the Real Estate Institute or the Franchise Association of New Zealand, nor are they accredited business brokers – despite taking a commission on sales. I know of five businesses in Nelson alone that have been taken in and disappointed by them – they seem to be picking on little towns around NZ.’

Win Robinson, the managing director of Auckland-based Franchize Consultants (NZ) Ltd who are the oldest established specialist franchising  consultants in the country, says that the damage being done to New Zealand businesses by companies such as this is incalculable. ‘Apart from the money the clients lose, there is also the loss of very real growth potential for some good businesses because many will understandably be put off franchising for ever.’

And he offers some advice. ‘If a business owner wishes to investigate the possibility of franchising they should ensure that they get advice from well-qualified and experienced franchise consultants with a track record of success. Check out that the consultant they choose is a member of the FANZ and is an accredited SME advisor, and also contact some former clients of the consultant for whom they have done work some years before. The value of a franchise system lies in its longevity.’

‘Franchising can offer huge advantages to many businesses but each business must have its franchise system and format bespoke tailored for its objectives and its specific type of business and its stage in the industry’s business cycle. One system doesn’t work for all types of business, and no responsible consultant would ever use a “cut-and-paste” type approach to preparing operational or other manuals.’

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