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ADVICE FOR NEW RESIDENTS IN NZ (IN 5 LANGUAGES)

by Simon Lord,
last updated 29/09/2010

Protect your own interests as you assess any franchise business opportunity. Translated versions of this article are available in Hindi, Traditional Chinese, Simplified Chinese and Korean.

These guidelines have been specially prepared by Franchise New Zealand magazine & website for the Franchise Association of New Zealand.

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How to evaluate a franchise business investment

Franchising is one of the best ways of starting your own business and offers a huge number of benefits, but there is still a risk involved - it's up to you to satisfy yourself that the business you are considering is a genuine opportunity that will match your needs.

1. Does this franchise suit you?

  • Is the business a good match for your skills and abilities?
  • Can you afford to support yourself until it is making a profit?
  • Will it provide the income you want in the future?
  • Do you speak good enough English to operate the business successfully?
  • Will you also want your family to work in your business?
  • Is their English good enough to talk confidently with customers?

2. Is this franchise a good investment?

  • How long has the company been operating and how long has it been franchising?
  • How many franchisees does it have?
  • Who are the competition?
  • What advantages does the franchise have to offer its customers?
  • Is there a long-term future for the business?
  • Carry out your own research into these questions - do not just accept the word of the person selling you the business. 

 

3. Research

  • Is the industry the franchise operates in growing or shrinking?
  • Are the sales levels and costs realistic?
  • What figures can the franchisor produce to back up its claims?
  • Who is already achieving those figures - and can you talk to those people directly?

4. Financial/Costs

  • What are the total costs of going into the business: fees, set-up costs, leases, vehicles?
  • How does the franchisor make money? Is there an initial franchise fee, an ongoing royalty fee which is fixed or based on turnover, or a mark-up on products sold to you by the franchisor? All of these are normal but beware of over-large initial fees - franchisors who only make money from selling franchises may not be interested in assisting you once you've bought your franchise.
  • Is there a guaranteed level of work or income? If so, there will be very strict conditions - make sure you understand them.
  • Carry out your own research into these questions - do not just accept the word of the person selling you the business.

5. Marketing

  • Is the franchise a known name in New Zealand which will attract customers for you?
  • Is there a launch package to help your new business get started?
  • How is ongoing marketing funded?
  • How do you generate new customers?
  • Do you have to make sales calls?

6. Legal

  • Is there a disclosure document that sets out in straightforward language all the most important facts and figures about the business?
  • How long does the franchise agreement last? Most have a limited term, eg. five years.
  • Do you have a right of renewal at the end of that time?
  • Is there an exclusive territory?
  • How soon can you have a copy of the franchise agreement to take to a lawyer?

7. Selection & Training

  • What are the most important attributes of a successful franchisee in this particular business?
  • Do they match yours? 
  • What training will you receive initially and how long is it?
  • Does the training teach you how to manage and grow your business as well as the basic tasks?

8. Support

  • What level of support can you expect?
  • Will you have regular visits from a member of the franchisor's team?
  • Does somebody help you analyse your performance and suggest improvements?

9. Operations

  • What will you actually be doing on a daily basis?
  • What hours will you need to work (including after-hours administration)?
  • Do you need to employ staff?
  • What skills do they need?
  • Can you spend a few days working with an existing franchisee to see what it is like?

10. Communications

  • How do the franchisor and franchisees stay in touch?
  • Are there regular meetings/conferences? Telephone support? An intranet?
  • How are disputes resolved?
  • If there is a master franchisee, do you also have a direct contact to talk to in the franchisor's office?

 

Then take advice...

These are just a few of the things you need to find out before making the decision to buy any particular franchise - Franchise New Zealand magazine & website publishes a complete list of more than 200 questions .

In addition, find out if the franchisor is a member of the Franchise Association of New Zealand, whose members are bound by a Code of Practice . Above all, take professional advice from a lawyer and an accountant experienced in franchising before signing up. Advice might seem expensive, but it's cheaper than putting all your savings into an investment that may be false,inadequately managed or simply not suited to your needs.

This article has been translated into the following languages:

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