SHOPPER'S GUIDE TO FRANCHISES
in this article:
Franchises come in all shapes and sizes, so how do you choose something that is right for you? The first thing you'll need to do is decide what type of business you want to be in. Here's our industry-by-industry guide to franchises in New Zealand which will help you pick out the cherries.
With franchises now available offering everything from hypnotherapy to boat hire, the range of opportunities facing would-be business buyers is bewildering. The good news is that, whatever your interests, you are almost certain to be able to find a franchise to suit you; the only question is, how do you choose? To help you, we've produced this industry-by-industry guide to help you pick out the cherries. And, to keep things simple, we've divided the franchises available in New Zealand into eleven categories:
- Auto Services
- Business & Commercial Services
- Financial Services
- Food & Beverage
- Health & Beauty
- Home & Building
- Home Services
- Leisure & Education
We've also added a separate category for master licences for franchise systems from overseas. In each category, we'll tell you a little bit about the franchise environment, explore the investment range, outline the types of franchises operating and the sort of skills franchisees need.
The categories haven't been chosen at random. If you look at our Directory of Franchise Opportunities , you'll see we have divided our advertisers up according to exactly these headings so you can see what's available. You can also explore each category using the Quick Find function above. Of course, once you've found the right type of franchise for you, you'll want to narrow your search down to the actual companies and then do your homework to ensure that you really are picking the cherry from the bunch. You can find some tips about researching your chosen franchises in the Articles & Advice section.
With the number of cars on New Zealand roads constantly increasing and WOF regulations becoming tighter all the time, auto servicing and repair is a growth sector. Franchises available in this category divide into two: the fixed type, such as Pit Stop, where customers bring their vehicle to you, and the mobile type, such as The Touch-Up Guys or Snap-on Tools, where the franchisee goes to the customer. In the latter cases, although there are exceptions, the franchisees mainly deal with garages and car yards or fleet operators where they can get bulk business rather than servicing private individuals. An exception to this is the windscreen repair industry, which is largely financed by the insurance companies.
The investment required in this sector varies widely between $40,000 at the lower end and $180,000 at the upper for a fully-fitted automotive service centre. In most cases, the mobile franchises also require the franchisee to provide a suitable vehicle.
While an affinity for cars is an obvious pre-requisite, very few franchises actually require mechanical skills. The mobile franchises specialise more in fast, high-impact repairs to bodywork and upholstery (paint, dents and vinyl) and require manual dexterity and a good eye, while the fixed premises centres need sales and management skills - they employ mechanics to carry out the actual repairs.
New Zealand has a very high proportion of business-to-business (B2B) franchises compared to other countries. The high incidence of small businesses which need to buy in external services rather than having them in-house may explain this. Whatever the reason, B2B has been one of our fastest-growing franchise sectors for some time and shows no signs of slowing down.
The largest categories within this sector are business coaching, commercial cleaning and promotional services, but other franchises can be found in all sorts of specialist areas from couriers to cabs, recruitment to rental cars and sign-making or admin services, among others.
In the main, B2B franchises are home-based and mobile, with investment levels starting from as low as $5,000, although new franchisees always need working capital too. However, a few are premises-based (such as Small Business Accounting, EmbroidMe and Snap Printing). Having premises usually doesn't mean franchisees don't have to make sales calls, though - marketing to local businesses is usually a vital part of the franchisee's role.
In every case, good interpersonal skills are required to market to other businesses. However, it is equally important to have an understanding of, and empathy with, the market you are serving. A Humitech franchisee, for example, must be able to relate to concerns about health and wastage in the food industry, while Bevinco franchisees need an understanding of the bar trade. Business coaches must be comfortable with formal presentations and couriers able to relate to all sorts of people - fast!
Computer franchises have had their ups and downs but are now on the rise again with the development of a number of stable systems. They divide mainly into two types: those which provide support when individual computers and small networks break down (the domestic/home and small office market) and those which provide specific development and management of software solutions such as accounting packages. A third sector offers sales and marketing-type franchises based around the provision of technical services such as website development.
Again, such franchises are usually home-based and mobile, with the investment required ranging from $20,000 to $70,000. While some training is provided, most franchises in this area will require you to be technically proficient already. The computer servicing franchises will provide many support functions to maximise time spent on the technical side. However, you will still need good interpersonal skills as well as computer skills in order to make a success of this type of business as you are the person in front of the customer. The software solutions type franchises may require additional skills, such as an accounting background or a knowledge of MYOB.
Another fast-growing sector, financial services discovered franchising in the 1990s when mortgage-broking stopped being a dirty word and brokers started providing a real service in a market all but vacated by the major banks. Since then, we have seen the development of a number of mortgage-based systems as well as the creation of alternative finance providers such as CAL, cost-reduction franchises such as Expense Reduction Analysts and financial planning franchise MoneyManagers.
Generally home or small office-based, the mortgage franchises start from around $30,000 (although some offer a non-franchised starting level below that). Larger franchisees in some systems can employ staff or sub-franchisees and develop quite significant businesses operating from commercial premises. With the financing franchises, while the franchise itself is relatively inexpensive you will need access to considerable working capital.
As you would expect in this sector, there are two vital attributes for franchisees: people skills and an understanding of figures. Mortgage brokers work a lot in the evenings and need to be comfortable visiting people in their homes (and make people feel comfortable inviting them in); finance and cost-reduction franchisees need to be able to work at senior management level within businesses. While a lot of the actual information used is centrally-researched and delivered to franchisees via computers, you will need to know or learn enough about finance and figures to answer detailed questions. For this reason, many franchisees in this sector have banking experience; however, it is not essential.
This is the sector where modern franchising began and it still accounts for a huge proportion of the market. Such names as Starbucks, Wendy's, Pizza Hut, Burger King and KFC are franchise icons, but in New Zealand there's just one catch - none of those famous brands is sub-franchised here, with all the outlets of each chain being owned by a single master licensee.
Not to worry, though, for there is still plenty of choice. McDonald's and Subway might have waiting lists for suitable locations but other market segments are offering fast growth: quality burger and pizza experiences, bakeries, almost anywhere serving coffee and an increasing number of cake and dessert specialists. Bin Inn andLiquorland offer retail outlets while there are also some mobile options, from coffee carts to vending operations. As a result, you can enter the industry for as little as $25,000 or spend as much as $500,000 - and the rest! Conversion franchising - where you buy an existing independent outlet and convert it to a franchised brand - is also increasingly popular, particularly with café franchises.
Among the fixed premises franchises, there are two different philosophies. Some franchises make a big thing of having all their food prepared on the premises (promising more freshness and higher margins), others prepare off-site (requiring less expensive floor space and fewer skilled staff). At the end of the day this is a business driven by margins and the bottom line, and any of the successful franchises clearly has a model that works given the right site and the right franchisee.
This is not an industry for the faint-hearted. In return for the potential to make a lot of money in a market which just goes on growing, franchisees need the management ability to deal with staff training and turnover, complex regulations, long and irregular hours, leases, landlords and customers who can get quite emotional if something goes wrong. Many people have romantic notions about running a little eatery but the reality is hard work - at least at first. You need high levels of energy and patience as well as good people skills. If you have these, you might even join the growing number of multiple franchisees who own more than one outlet in the same - or even different - chain(s).
The mobile franchises have few of these drawbacks (apart from the early starts) as they tend to be one man or husband-and-wife operations. However, they do not lend themselves to ownership of multiple outlets in the same way and require constant hands-on attention from the franchisee.
One of the major growth areas internationally, with the ageing of the baby boomer generation and a greater awareness of OSH issues, the number of opportunities in health and beauty has been steadily increasing over the past two years.
On the health side, we have the nutrition angle - health stores such as Hardy's Healthy Living - and the exercise angle, with a choice of gym and fitness centre brands available. There are back-rub franchises and even a franchised medical centre group. The beauty side includes mobile make-up and beauty therapies, hair salons, waxing specialists and appearance medicine.
While a one-person mobile beauty therapy business could be yours for $10,000, a fully-equipped gym or health store could cost you 20 or 30 times that to establish - with commensurate rewards.
This is an area where appearance counts. If you are grossly overweight, even superb people and management skills may not be enough to help you succeed in a slimming or fitness centre franchise. Equally, if you are in the beauty business, you'll need to put your make-up on every time you go out. But if you aren't the type of person who is passionate about this sort of lifestyle anyway, you probably shouldn't be considering a business in the sector - no matter how big the expected growth over the next 20 years.
Expect to see new franchises springing up in this sector over the next few years as New Zealand's population ages and the baby boomers spend up large on preserving their freedom and lifestyles. Homecare for the elderly is already established (see Home Services) and Walk on Wheels specialises in mobility scooters and other aids. Another area to watch is the potential for branded systems in dental and hearing care - Visique and OPSM have already proved this in the eyecare market.
Your average Kiwi home-owner might consider themselves pretty handy about the house, but that hasn't stopped a number of very successful franchises developing in the Home & Building sector. Some of these are complete house-building franchises aimed at builders and business people looking to develop a competitive edge, while others are specialist service providers supplying insulation, spouting or entertainment systems for new homes. Another whole layer of franchises helps people upgrade existing properties through concrete resurfacing, garden edging, kitchen refurbishment, tile and masonry care and window restoration. Building inspection and home handyman franchises add to the mix of options.
While many of the franchises in this sector are necessarily mobile and therefore fit into the middle bracket around the $25,000 to $70,000 investment level, the building franchises are remarkably low-priced. However, the need to build at least one show-home and to have considerable working capital means that you have to have substantial backing. Industry experience is often desirable but not all franchises require it as they see substantial business management skills as more important. The role requires you to co-ordinate many different strands simultaneously while dealing with all sorts of regulations - oh, and keep nervous and emotional customers happy and calm.
Many of the lower-priced franchises require practical ability as well as a good state of health. If you have the aptitude, the skills can usually be learned. Some franchises will allow you to bring in others to assist, or even to sub-contract or employ specialist staff. You need to check carefully what is and isn't permitted before committing yourself if you are considering such an option.
In terms of sheer numbers, this is the biggest sector of all with perhaps 2-3,000 franchisees offering everything from lawnmowing to ceiling cleaning. Most of those franchisees are individual operators or couples, although several of the larger franchises operate via a three-tier system: the local franchisees are supported by a regional master franchisee who, in turn, is supported by the national franchisor. This is an efficient system which ensures that ‘head office' does not need a huge management and staffing structure and which, at its best, empowers and motivates those supporting franchisees through their financial stake in the business - exactly the same factors that motivate the franchisees themselves.
This is typically a low-investment sector. Franchises generally cost around the $10,000 - $20,000 level plus equipment and a vehicle, although some of the specialist services can range as high as $85,000. It is also the sector in which you are most likely to find the offer of a ‘work guarantee' worth up to $1000 per week.
The work guarantee is a system used to reassure those concerned about making the leap into self-employment by guaranteeing that the new franchisee will be able to earn at a certain level for a certain period of time - say, the first year. It is not an income guarantee. What the franchisor is promising is that they will provide the new franchisee with a certain value of work every week. If the franchisee does that work, then they will earn that amount of money. If they do more work, of course they will earn more. If they do not do all the work they are given by the franchisor, however, they will earn less.
Work guarantees tend to vary according to how much ‘work' you purchase from the franchisor at the beginning of your term. If you start small, you are guaranteed perhaps $600 worth of work. If you pay more to start larger, you might be guaranteed $1000 worth of work. That is not a restriction on your earning power - you can service as many additional clients as you can handle.
The home services sector has seen tremendous growth over recent years, but the larger companies say there is still plenty of demand and that their biggest problem is not finding new customers but new franchisees. For this reason, it is a very competitive market, with each of the companies looking to find an edge and sometimes prone to putting their competitors down. Ignore this: if you are looking for a franchise in this sector, look for one with a structure that best meets your own needs and with a culture and people you feel comfortable with.
There is some consolidation within this market - Green Acres is part of the same group as Hire A Hubby - but new systems and new niche markets are constantly opening up (for example, home care for the elderly and pool management).
Another important sector internationally which is seeing real growth in New Zealand, the leisure market targets the disposable dollar with a variety of ‘action activities' for all ages from ‘pay for play' up to boat hire franchises.
Meanwhile, as parents become increasingly concerned for their children's education, so a number of specialist franchises are springing up to assist in areas such as pre-school gyms, drama and maths. Art, music, computer, science and language tuition are also growing fast in many countries, and we can expect to see those concepts here soon. This is an area where caution is required: while music lessons have always been a ‘user pays' add-on to traditional education, it may take a while for academic tuition to catch on and the niches may be too small for some concepts to thrive.
In New Zealand, the retail sector has traditionally played a smaller role in franchising than in many other countries. Retailing here is dominated more by chains than by franchises, which perhaps reflects the relatively small size of our market as well as the overbearing price-driven influence of The Warehouse. However, an increasing number of retail franchises are opening up here, many coming from across the Tasman - although retail success in Australia doesn't always translate to retail success in New Zealand, so do your homework carefully. This article should help you work out what you need to know.
The big issues in retailing are premises, location and size, all of which have a huge impact upon margins. It is worth noting that by developing specialist offerings in large markets such as bedding, books and liquor, many of our most successful home-grown retail franchises have developed outside the malls where they make a big point of serving local communities. Convenience stores and video outlets make a virtue of easy parking and non-mall hours.
With the site playing a key part in the success of a retail business, great care must be taken to research the local market, the competition and the location properly. Most experienced franchisors will have a list of criteria that any site must meet, but there are never any guarantees and it is important that new franchisees also conduct their own research.
Investment levels vary widely. While it is possible to establish a Dollar Value franchise outside the main centres for under $200,000, most retail opportunities start from $200,000 and go up to $1 million plus.
Retail, like food, has become a seven day business and initially most new franchisees can expect to be working for most of those days. However, as with food, retail offers the advantage that staff are essential and with good people and good management a franchisee can rapidly build a business that does not require their presence on-site all the time. Retail also offers the opportunity to own multiple outlets and develop your own little empire.
Most franchisors say that new franchisees require no previous retail experience - indeed, some prefer it. In reality, though, this is another area where good people skills are vital for leading your team and providing your customers with friendly and efficient service, and such people will often have a retail background. You need the ability to smile and to stay on your feet all day! Many retail franchises are ideally suited to couples who between them have a range of financial, administrative, management and people skills which few individuals can match.
The great delight of franchising is that if you look hard enough you can find a franchise opportunity in almost any field you choose. Real estate, transport, whiteware rental, industrial servicing and many other areas now offer franchise opportunities to those with a taste for adventure and a desire to determine their own future. Take a look through our Directory of Franchising starting on page 100- if you're looking for something different, franchising is almost certain to be able to provide it, and if you can't find what you want, it's probably coming soon
Finally, if you have an entrepreneurial streak, how about a master licence? These are available both regionally (within the three-tier systems favoured by the home services sector and adopted by some B2B franchises such as Fastway Couriers and the computer servicing systems) and nationally (where you would bring a franchise system in from overseas).
In both cases, master licensees select, appoint and manage franchisees locally, acting effectively as the franchisor in their own area. Bringing in a new franchise system from overseas is not for the faint-hearted: it involves considerable research, high levels of investment and usually takes longer to provide a good return. However, once established, it can be extremely profitable.
Master licensing tends to suit those with an entrepreneurial streak and a sound track record of business development who have the ability to draw together many different strands in order to make a new business ‘come alive'. You also need the skills to motivate franchisees as they go through their own growing pains, which makes this a real challenge for high achievers.
Many people have achieved their dream of self-employment through buying a franchise and, as you can see from the above, there is almost certain to be something available that will meet your own needs.
You need to find an industry that suits you, a franchise full of people you'd like to work with and an opportunity that is both affordable and provides the return and lifestyle you want. Whatever you choose, accept that it will be hard work at first before the rewards start to flow - that's business.
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