STARTING AFRESH IN NEW ZEALAND
in this article:
Simon Lord considers the opportunities and issues for immigrants looking at franchised businesses
One of the most graceful acceptance speeches at the Westpac New Zealand Franchise Awards several years ago came from Jenny Chen, the Franchisee of the Year in the Business Services category. Just a few years before, Jenny had spoken little English at all. It was typical of her determination to succeed that she gave a very polished performance in front of a 350-strong audience that included the Prime Minister of her adopted country.
Other years have seen South African, British and Indian immigrants winning various categories at the Awards and inspiring others. We decided to look at the opportunities and challenges that face new immigrants looking to get into business through franchising.
‘Franchising offers many advantages to new immigrants,' says Daniel Cloete, national franchise manager for Westpac. ‘Buying a franchise offers a very good way to get to know how business operates in a new country. People who buy or attempt to set up independent businesses often struggle if they are trying to adapt a known business model to the totally different market and business environment here. With a franchise, they can get a name and a system that are designed to work in New Zealand conditions. Providing they can meet the franchisor's criteria and operate it well, a franchise will give them an excellent start.'
Jenny Chen originally came to New Zealand five years ago to study in an English-speaking country because she felt that having good English would be a real advantage when it came to doing business back home in an increasingly outward-looking China. She studied at Unitec, doing English for a year before a two year diploma in business studies. Along the way, she fell in love with one of her flatmates, an Italian, and she and Fabrizio were married two years ago. ‘I didn't come here thinking to find a white guy, I thought the cultures were too different,' she laughs. ‘But you never know your future.'
With no family in New Zealand, Jenny admits she found it hard at first. ‘It was hard as a student, quite lonely and understanding was so hard. It does take time to get results. But I am lucky I think because I am easy-going, I like talking and meeting strangers. I think it is a weakness of Chinese people that they are too shy to talk sometimes, but I like it. I think if you go overseas you should learn the culture, find out how Kiwis live and shouldn't just keep to your own culture.' Nonetheless, as many immigrants have found, it is usually easier to make friends with others who have arrived at the same time than to find friends among people whose social groups are already established. ‘Most of my friends are Chinese or Italian - not yet many Kiwis,' Jenny says.
Clients, however, are another matter. After graduating, Jenny wanted to put her new-found knowledge to use in her own business and bought a Paramount commercial cleaning franchise. ‘I thought of a coffee shop at first, but I didn't know how to make coffee or even the names of all the desserts so I was too scared to do that,' Jenny laughs. ‘A friend told me about Paramount. It offered a stable income for a low investment and lots of support. I'd just finished studying, I wasn't confident with building customer relationships so it was a good way to start.' She soon learned. ‘Now I feel very comfortable. I think at the beginning some didn't trust me but Paramount told me how to handle that and give them extra care and now it's easy. It takes time and effort to set up good relationships. I visit my clients to talk about how we are doing every month. I take them coffee and muffins and talk about their family as well. I get them to show me anywhere where we didn't do a good job so they know I really care about my business. I think all my clients like me now!'
Jenny employs a team of Chinese and Korean staff, some older than herself at 31. ‘I think it is easier for me to communicate with other Asian people but there are other issues. In China young people should respect older people, so if I tell an older man what to do I have to think about how to do it first.' Her business has been very successful, with 20 clients and 200% increases in turnover leading to her winning the Franchisee of the Year title. ‘I have learned a lot which I can use in any type of business,' Jenny says. ‘I am much more confident for the future.'
Many newcomers to New Zealand, no matter where they come from, would love to emulate Jenny's success. We talked to some expert advisors to learn how other immigrants can set themselves on the road to success.
The first thing that Jenny did right, all our experts agreed, was develop her language skills. ‘Most franchises require the franchisee to interact with the public and make sales, which requires good communication skills,' says Daniel Cloete, who is originally from South Africa. ‘While a few franchises are structured so the franchisor team handles much of the communication with clients directly, in general a franchisee with good English will achieve much better results.' Craig Weston, an accountant specialising in franchising, agrees: ‘Immigrants from English-speaking countries find it easy, but others will find it really important to polish their language skills as fast as possible. We have an accountant here from China - she's exceptionally good and the clients love her, but without good English the truth is that she wouldn't get far.'
Laurel McCulloch, who represents several franchises in her role at Link Business Broking, thinks that language skills are sometimes not sufficiently emphasised by the Immigration Department, particularly for people looking at setting up their own business. ‘It's not fair on the applicant,' she says. ‘Someone might seem to have good English in a letter or email, but as a franchisee they're going to have to communicate well in conversation with their franchisor, their staff and their customers. If they can't, their business is just not going to work. I'd rather recommend that they go off and work on their English first than see them struggle through buying a business they're not yet able to run properly.'
Where this is not practical and language skills are a real barrier initially, franchisees must choose carefully. Commercial cleaning franchises such as Paramount may secure contracts on behalf of franchisees, while Crewcut lawnmowing has a dedicated Asian support team who do everything from collecting payment from clients to producing information packs in Mandarin.
Because Jenny was already in New Zealand, one problem she didn't have was the lengthy immigration process. ‘People tend to underestimate how long this can take and, if they want to buy a franchise, what is involved,' says Laurel. ‘I get plenty of requests from overseas via email but you can't buy a franchise remotely - it's important that you actually come to New Zealand, see the business and meet the franchisor to see if you fit the necessary profile.
‘One couple from the UK have recently opened their business here after working on emigrating for a full year. They found a business they liked, flew here to take a look and meet the franchisor, investigated various sites then went back to sell up their home and go through all the paperwork to apply for a Business Visa. It all takes time, and if you get the paperwork wrong then it can really slow the process down. A good immigration consultant can be a big help but even then it still takes a while and franchise buyers have to understand that a franchisor can't afford to hold a particular location for an indefinite period.'
In some cases, of course, immigrants will find the idea of buying an existing business a more attractive option than starting from scratch. That certainly gives the new owner an existing customer base and cashflow from day one but is still not without its pitfalls.
‘What tends to happen in New Zealand is that the sales agent or broker will actually draw up a sale and purchase agreement and get both parties to sign it before a solicitor even sees it,' says lawyer Clive Neifeld. ‘This can cause considerable problems, especially as many agents (not the specialists like Link) fail to appreciate that when an existing franchise is sold, the franchisor must approve the incoming purchaser as a suitable franchisee. There are usually training requirements and there may also be arrangements with landlords to consider. Having an agreement already in place before these things are considered can put a great deal of strain upon all concerned.
‘European or South African immigrants usually expect a solicitor to be involved early on, but I have seen those from other countries going straight into binding agreements without legal advice. Agents also like to put as early a date as possible for the agreement to go unconditional, because that's when their fee gets paid. But short term agreements only add to the pressure,' says Clive, who has emigrated twice himself - from Johannesburg to London and then, almost 10 years ago, to Auckland. ‘It's particularly hard for an immigrant with no network of advisors to get a workable outcome in those circumstances. Talk to a lawyer before you sign anything - the worst thing you can do is not take advice!'
The fact that franchisors need to approve all incoming franchisees - even those buying existing businesses within their system - is just one of the aspects of buying a franchise that some immigrants fail to understand.
‘When you buy a franchise, you are undertaking to run a particular business offering a particular product or service in a particular way,' says Laurel McCulloch. ‘You have to operate within the franchisor's rules - you can't just do what you like with it. You also have to maintain the standards of the franchise, whether that's customer service or food hygiene. If you don't, you're damaging the reputation of every other franchisee in the group and the franchisor will come down hard. Some newcomers struggle with this concept, but if you can't accept it, don't buy a franchise.'
Of course, it has to be accepted that one reason many immigrants buy businesses is not because of their entrepreneurial dreams in a new country but in order to qualify for residency under one of the Business Visa schemes. This leads to some interesting situations, with one observer suggesting that over 50% of Chinese-owned businesses in New Zealand are not profitable. ‘Their owners come in with a lot of money and buy something to run for three or four years until their residency requirement has been met, at which point they sell them on,' I was told. Laurel agrees that this could well be true, ‘but that's not what buying a franchise is about. Franchisors put a great deal of pressure on franchisees to succeed and be profitable, and they don't want people who don't care. They do want people like Jenny Chen - hard workers, intelligent, eager to learn and build their businesses.'
At the same time, new owners have to accept that a franchise doesn't offer an easy route to riches, either. As accountant Craig Weston points out, ‘It's easy to look at a business and think "I'm a good negotiator, I can reduce costs here and increase margins there." But franchise fees aren't negotiable and in general you'll find franchisors have costs and margins very much under control. Building the business and increasing profits is usually more about getting additional sales - which takes us back to the importance of communication skills again.'
For those with good communication skills, franchising offers a tremendous variety of options. One ever-popular industry is food, which many immigrants perceive as offering high profitability and being relatively easy to run. Shiraz Hajee , who won the Westpac Supreme Franchisee of the Year Award in 2005, chose his Jesters Pies franchise after research which consisted of travelling on buses all over Auckland and watching and listening to what people were buying. ‘I noticed that when the schools came out all the children got on the buses eating these pies,' says the former Bombay businessman. ‘I thought I had to try one as they were so popular, so I did - and I tell you, it was disgusting. When I discovered Jesters, I thought that a great-tasting pie had to be a real winner.'
Even with the advantages of a quality product, however, it was Shiraz's other skills that took him to the top. A natural salesman and story-teller, he trains the staff at his central Auckland outlet in the art of communicating with customers and making them smile, and recruits extensively from among business students at the University - people like Jenny Chen used to be, just two short years ago.
Buying a franchise can be a great way to get into business in a new country. Potential franchisees must, however, be careful to choose their business well, make sure they have the skills appropriate to their role and, most important of all, take the advice of professional people with local knowledge. By doing so, they will increase the chances of following in the footsteps of Shiraz, Jenny and countless other successful immigrants.
- Remember that the immigration process takes time and that until it is complete you are not in a position to sign anything.
- Never sign any purchase contract or franchise agreement until you have taken the advice of an accountant and a lawyer with experience in franchising in New Zealand.
- Find out exactly what the role of the franchisee involves. Spend at least one day working with an existing franchisee. Are you going to be comfortable in that role?
- If your language skills aren't up to the business yet, wait until they have improved. Take every opportunity to practise them.
- If you need money, talk to a specialist franchise banker - good franchise systems often attract special finance packages.
- Do expect to play a hands-on role in running the business yourself - franchises are not generally designed to suit passive investors.
- Don't borrow more than the business can afford to repay. Leave yourself enough to live on.
- What is your long-term strategy? Franchisors usually look for a minimum three-year commitment.
- Where can you live? New Zealand has many delightful towns, but you may feel isolated if you are far from other members of your own community. That is why many immigrants settle in Auckland, at least at first.
- Not all franchises will qualify an applicant for entry under the Long Term Business Visa scheme. For more information, click here .
This article was first published in Franchise New Zealand magazine Volume 16 Issue 4, 2007
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