Seminars – improving performance for franchisees and franchisors
posted on 27th September 2016
February 2017 - Three seminars being held in Auckland in March are designed to help franchisors improve the performance of franchisees, and provide a foundation in franchise management for new franchisors and franchise executives. There's also news of a new seminar in May.
'Glimmer of good news' for Mad Butcher owner?
posted on 26th September 2016
A former director of Salvus Strategic Investments, which became Veritas Investments, has criticised the company for its high-risk acquisitions strategy saying there were no clear synergies between them. He welcomes some good news that the group's bankers have continued to support Veritas and suggests shareholders will be happy, but makes no forecast for Mad Butcher or Nosh franchisees.
Veritas' share price has been severely impacted by the disappointing performance of the four acquisitions. It closed the 2014 year at $1.25, the 2015 year at $0.48 and hit a low of $0.15 on Thursday.
It has subsequently recovered to $0.23 but has a sharemarket value of only $10.0m compared with the purchase price of just over $74m for the four purchases.
Ironically, the original Salvus shareholders invested $20.1m in the company and received over 80 per cent of their capital back, while Veritas shareholders have invested $25m but these shares are worth less than 20 per cent of their issued price.
Small businesses predicting bumper year ahead
posted on 23rd September 2016
22 September - Revenue and optimism are on the increase among small businesses
What can you afford to buy in a franchise?
posted on 23rd September 2016
Before you start looking at any particular franchise, you need to know what’s possible. Philip Morrison explains how to evaluate your own financial position
Philip Morrison shows you how to examine your finances to determine the price range of franchise opportunities you can realistically consider, and how to evaluate the maximum price that you could afford to pay for a franchise
One of the results of rising house prices is that many people are using the increased equity in their homes to realise a dream and fund them into their own business. Franchises are particularly attractive to first-time business owners as they can be in business ‘for themselves, but not by themselves’. Having an established brand, proven business systems and specific training and support are all compelling reasons to choose a franchise.
Buying any business is a big decision that often requires a significant capital investment secured over the family home. It therefore demands careful scrutiny of the financial risks involved, as well as other factors such as family support, time commitment, relevant experience, your aptitude for business and your people skills.
The first step for any potential franchisee is to work out your personal equity or net worth so you can determine what franchise systems are realistically within your financial reach.
You can determine your personal equity by compiling a personal statement of financial position. This involves noting what you own – your large personal assets, such as your house or investment property – and deducting what debt you owe. The balance left over represents your personal equity. We suggest you only include assets valued at over $5,000.
In the example in figure 1, Arthur, our potential franchisee, has a house which has a current market value of $600,000, a car which has a current market value of $20,000, a redeemable life insurance policy with a current value of $10,000, and ... Read more
Business feedback sought to ACC levy changes
posted on 21st September 2016
21 September 2016 - ACC is asking New Zealand businesses to share their ideas about incentives that encourage safer workplaces and changes to ACC levies
ACC is asking New Zealand businesses to share their ideas about incentives that encourage safer workplaces and changes to ACC levies as part of a consultation process running to 19 October 2016.
Crowd-funding appeal from Aussie pizza franchisee
posted on 19th September 2016
A former Australian Pizza Hut franchisee has launched a crowd-funding appeal to fight for compensation after he claimed that price-slashing by the company caused him to have to sell pizzas for less than it cost him to make them. A previous attempt by a group of Australian franchisees to bring a class action against the company was thrown out by the Federal Court in March.
No such action has taken place in New Zealand where Pizza Hut master franchisee Restaurant Brands operates the majority of outlets itself. However, the Australian story has been repeated in the New Zealand media.
The master licence for Pizza Hut in Australia was recently acquired by a private equity firm. A different private equity firm, NBC Capital, was recently blamed for the decline of the Eagle Boys franchise by its founder, Tom Potter - see http://www.franchise.co.nz/news_items/1494
Pizza Hut slashed the prices of its pizzas in 2014 to compete with rival Dominos, with its cheapest pizzas selling for A$4.95 (now A$5 - NZ$5.15). The cheapest pizzas currently sell for NZ$5 throughout New Zealand.
After a group of franchisees failed to get an injunction to stop the price cuts going ahead, more than 280 franchisees from across Australia began a class action against Pizza Hut's then-owner Yum Restaurants in 2015, claiming its aggressive pricing policies were forcing mum-and-dad operators to the wall.
Gordon said once wages, rent, franchise costs, royalties, marketing and delivery costs were taken into account, it cost him A$5.50 (NZ $5.67) to make a A$4.95 (NZ $5.10) pizza.
An estimated 90 percent of franchisees claimed losses and business collapses as a direct consequence of orders they slash the price of pizzas by up to 50 per cent, to take market share from rivals.
The class action, initially led by Sydney franchisee Danny Diab, alleged unconscionable conduct under the [Australian] franchising code.
While Diab walked away from the class action, concerned for the impact it was having on his family (he declined to speak about the case to Fairfax, citing a confidentiality agreement signed as part of the settlement), the rest stayed – and lost.
Yum defended the action and in March the Federal Court threw out the class action.
Eagle Boys founder calls new owners' policies 'genocide'
posted on 14th September 2016
The Eagle Boys franchise in Australia entered Voluntary Administration earlier this year following a long period of decline under the ownership of private equity firm NBC Capital. Existing Eagle Boys franchisees have been vocal about the perilous state of their businesses. Now Tom Potter, the original founder of the business, has spoken out about the mis-management of the franchise under its new ownership and the changes it made to the core business which he said were ultimately 'genocide' to the business's franchisees. The full article makes compelling reading. (NB. the Eagle Boys operation in New Zealand was sold to Restaurant Brands in 2000 and absorbed into Pizza Hut)
He said once the new ownership and management took control they began to implement significant multiple changes to all aspects of the business along with the core marketing strategies of Eagle Boys, and in his opinion, these changes were ultimately 'genocide' to the business’s franchisees.
This included increasing prices and an attempt to re-position the company as a gourmet pizza brand, which only resulted in alienating long term loyal customers.
According to Tom, Eagle Boys’ key family target market who was interested in its $20 value meal became alienated and sales started to decline rapidly.
He explained that gourmet food is only a small percentage of the overall take-away food market at 5%, while fast food accounts for 60%, budget food 25% and QSR (Quick Service Restaurants) 10%.
In Tom’s eyes, another major mistake that the new Eagle Boys management made was replacing its ‘2 minute guarantee or it’s free’ commitment by watering it down to ‘2 minute express when it’s available’, and discontinuing the marketing altogether, which resulted in stores falling behind the expected standard and customers waiting longer.
What's next for The Coffee Club?
posted on 6th September 2016
The Coffee Club's master franchisees in New Zealand are looking at bringing in two more brands in 2017. The Groove Train and Coffee Hit are both sister franchises owned by The Coffee Club's Australian owner. Since it opened its first NZ store in 2005, The Coffee Club has been hugely successful here, with its 60th store about to open.
The Groove Train is described as an "urban dining experience" (think gastro bar), while Coffee Hit is an upmarket roasted coffee café (think Mojo).
[Master franchisees Brad Jacobs and Andy Lucas] have got an agreement in principle from the franchisor but are still assessing local franchisee demand for the more expensive The Groove Train which would have an upfront cost of about $1 million. They're also looking for suitable locations within shopping centres to get it started.
They've just signed another 10-year franchise with Minor DKL for The Coffee Club and plan to expand the chain to around 93 stores within the next seven to 10 years, mainly in regions outside of Auckland where most of their stores are based.
Another Mad Butcher store faces liquidation
posted on 6th September 2016
The Inland Revenue Department has filed an application to liquidate the business behind the Silverdale Mad Butcher store, the latest issue to hit the franchisor, NZX-listed hospitality company Veritas. The store was relocated in 2012 from central Orewa, where it had traded successfully for 12 years, to the still-growing Silverdale shopping precinct.
Veritas chairman Tim Cook said the company had been advised of the IRD action by the franchisee in Siverdale.
No outcome had been determined and wouldn't be until the hearing on Friday.
''Tax is a personal matter between the franchisee and IRD and as such neither Veritas nor Mad Butcher have any comment to make,'' Cook said.
''Once any outcome is known Veritas/Mad Butcher will determine what is required going forward.''
Women-only gym to go 24 hours
posted on 6th September 2016
Configure Express is set to introduce 24 hour opening with small Configure gyms to feed into the larger outlets. The announcement follows a number of closures and a split which has seen the four former Configure outlets in Wellington re-branding.
Configure Express managing director Greg Peters said gym requirements were changing and his business was following global trends.
People wanted shorter contracts and better availability, he said.
"The gym market has changed since we first set up and we were going in a different direction than other gyms."
Overseas the trend was for smaller gyms to feed into bigger gyms and he planned to open Configure 24 hours gyms to work alongside the Configure Express franchise.
There was still a market for female only gyms but his business had to make changes to be successful.
In some areas it was not possible for the gyms to follow the new direction, which led to closure and splits, he said.
Women-only gym franchise splits
posted on 30th August 2016
A group of women-only gyms in Wellington has split from the national Configure Express franchise. While both sides have insisted the split was 'amicable', neither will comment on the reasons behind it, citing a confidentiality agreement. In a statement, Configure Express says the move to 'part ways' was in the best interests of both companies.
The four former gyms on Willis St, Lambton Quay, Lower Hutt and Upper Hutt, have now rebranded as Revive Fitness.
Lambton Quay Revive Fitness general manager Sheree Cooper would not say why the company had left the franchise, citing a confidentiality agreement.
It would be business as usual for the gyms and members, she said.
Members were under contract with the owners of the gym and not the franchise, so their contacts would not change, she said. If they wanted to remain with the Configure franchise, she said members should speak to her on an individual basis.
Mad Butcher earnings down as Veritas posts loss
posted on 30th August 2016
The NZX-listed company that owns the Mad Butcher franchise is continuing to make the headlines after posting an audited net loss of $4.59 million in y/e June 2016. While the major loss stems from the end of a joint venture with the local Burger King master franchisee, three Mad Butcher stores have been closed. The performance of Veritas's Nosh Food Market stores, which it has been planning to franchise, was described as 'disappointing'.
The losses stem from the end of its Kiwi Pacific Foods venture, which supplied beef patties to the local Burger King franchise operator, Anatares Restaurant Group, a joint partner in the venture.
The deal broke down last year and was going through the courts before the two parties agreed to sell the assets.
A loss of $2.9m was recognised against this, while write-offs relating to the Mad Butcher cost it $2.35m.
Three Mad Butcher stores were closed during the second half of the year because they were "consistently unprofitable". In a statement, the company said the market was currently very competitive "with supply shortages creating challenges around product choice and pricing".
Veritas said the majority of stores were trading profitably but earnings before interest, taxation, depreciation and amortisation (ebitda) fell 28 per cent to $4.57m.
NZ’s international franchisors share their secrets - PODCAST
posted on 27th August 2016
August 2016 – Four of New Zealand’s top international achievers came together at the Franchise Conference for a gripping panel session on how to expand overseas. Their message? ‘Just do it!’
Lessons from the 2016 franchise conference
posted on 25th August 2016
This year’s Franchise Conference in Tauranga was generally regarded as one of the best ever. Here's our review.
Is it a bird? Is it a plane? No, it’s a pizza!
posted on 25th August 2016
25 August 2016 - Domino's to start trialling drone deliveries in New Zealand from next month
One in three Aucklanders would consider leaving
posted on 24th August 2016
A poll conducted for website The Spinoff by research company SSI found one in three people (32.2 per cent) surveyed had considered moving away from Auckland in the last two years because of house prices, says the New Zealand Herald.
A further 36 per cent hadn't considered the option but thought it was a good idea. Auckland housing prices have risen by 85 per cent in the last four years, taking the average price to around nine times the average household's income.
Between the 2008 and 2013 Censuses, 32,184 people left Auckland for the Waikato, Wellington and Canterbury regions, while 29,301 moved to Auckland from those areas.
Economist Shamubeel Eaqub said there were two types of Aucklanders leaving for the provinces - retirees heading for cheaper areas like Tauranga and Northland, and families looking for a better lifestyle.
Since the 2013 Census, Auckland had become even less affordable, but the decision to leave the city was a challenge for some.
"The challenge for a lot of people is they're not able to get the same kinds of jobs or job security in other parts of New Zealand.
"That's [probably why] it's only a third of people saying they've actually considered it."
Download our latest issue to read more about business opportunities in the regions - http://franchise.co.nz/shunts/72
BurgerFuel to expand to US despite losing Subway
posted on 23rd August 2016
23 August 2016 - BurgerFuel has announced that it is to go ahead with its US expansion plans despite ending its collaboration agreement with Subway and Franchise Brands following the death of Fred DeLuca last year. The company said it would continue to maintain a close relationship with the group which still has a ten per cent holding in BurgerFuel as well as a position on its board.
"The passing last year of Subway founder, Fred de Luca, our key contact within the organisation and the ultimate vision behind the partnership, has meant that Franchise Brands and Subway's priorities have had to change," CEO Josef Roberts said.
"It is clear that for now they have their own challenges. Given this situation we felt that it would be best to seek an end to the operating partnership, which if not in full swing, only delays us from developing in the United States."
"We are confident that we will get something off the ground in America soon and that our goal of opening in the USA will still be fulfilled," Roberts said.
"Let's not forget we have a strong business, no debt and a significant amount of knowledge about doing business in the USA which frankly has been necessary to understand."
The company requested a release from its agreement which has now been granted. Roberts said while the outcome wasn't what the company wanted, it had to be adaptable to the circumstances.
Keep on truckin’, says NZ economic forecast
posted on 18th August 2016
August 2016 - The New Zealand economy is set to continue growing at a firm pace for some time, according to the latest Westpac Economic Overview
Kiwi diners put off by dirty bathrooms but forgiving of slow service – survey
posted on 17th August 2016
17 August 2016 - Findings from a nationwide study suggest that most Kiwi diners (70 percent) prefer casual dining over a formal setting, and that excellent food is what will keep them going back to a restaurant time and time again.
Cartels Bill to be amended to clarify franchising issues
posted on 12th August 2016
August 2016 – A law that could have badly affected franchisors and franchisees is to be amended.
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