The Market

by Simon Lord

last updated 15/07/2014

Profits without honours

by Simon Lord

last updated 15/07/2014

When will the nation recognise the pioneers of one of our largest business sectors?

Twice a year, my father used to pore over the list of new honours granted by the Queen. It was a habit from his early days in the UK Ministry of Defence, when his boss gave him the task so that appropriate messages of congratulations could be sent to colleagues who were included – as some always were, by virtue of seniority or longevity if not actual performance. 

Personally, I’ve always felt that such honours should be reserved for those who make a genuine contribution towards the betterment of society. Honours are also an appropriate way to recognise exceptional long-term achievement in a particular field, whether sport, the arts, service or business. So, like my father, every New Year’s Day and Queen’s Birthday I go through the honours list to see if there are any names I know from the franchise sector. Sadly, twice a year, I am disappointed.

The more I think about this, the stranger it seems. After all, for the last 25 years, franchising has been a significant contributor to the New Zealand economy yet the people who have created and nurtured this incredibly valuable sector have received no public recognition of their efforts.

The value of the sector

Let’s look at some figures. I am told that our much-lauded wine industry contributes around $1.5 billion to New Zealand’s GDP every year – a superb achievement, and one that has seen its pioneers and senior figures rightfully honoured. The film and television industry contributes perhaps twice as much as the wine industry, and more again in terms of tourism dollars, as (Sir) Peter Jackson would attest. Yet even that pales in comparison with the franchise sector, which is valued – at a conservative estimate – at $20 billion per year. On that basis alone, you might expect franchising to get a look-in when the honours are being handed out, but apparently not.

So let’s look at some more reasons for honouring the creators of this flourishing sector. Currently, there are over 20,000 franchised units in New Zealand. That means there are a hell of a lot of Kiwis who have learned about running their own business through buying a franchise over the years. Many of those people have gone on to other forms of business ownership, or still own franchises, or have become franchisors, or have taken their experiences back into the workplace with a greater understanding of the challenges that businesses face. That represents a huge upskilling of New Zealand’s entrepreneur base and workforce.

And a great many of those 20,000 businesses employ others, often young people. Franchises help our children into the workforce, teach them systems and offer them responsibility. Franchises develop their management skills and educate them in the fundamentals of business.

Above all, franchises offer people the opportunity to earn not just a living but to earn self-respect. It’s an important role, and one they do well: latest research from the US shows that franchise businesses create jobs faster than other businesses.

Franchising IS big business

So if franchising is so important to New Zealand, why aren’t its heroes getting any recognition?

Call me cynical, but I suspect one of the reasons is that, despite its success, franchising isn’t seen as ‘big business’. It’s easy to recognise the people behind Fonterra or The Warehouse because their names and faces are frequently in the business pages. But franchises are made up of a lot of small businesses. That doesn’t mean that franchisors are doing any less of a job than CEOs – in fact, leading a franchise successfully may require an even greater range of skills, particularly when it comes to motivation and change management – but it does tend to reduce the apparent size of the businesses involved.

All that may be about to change, though, with the sudden leap in BurgerFuel’s market price caused by the announcement that the founders of Subway have taken a share in the company. The New Zealand Herald excitedly reported that BurgerFuel investor Josef Roberts had made $30 million in a day. Coming on top of the 2013 back-door listings by Mad Butcher Holdings and Esquires, suddenly people are noticing that franchising can be big business, too – and that some of our franchise systems are not only competing successfully with imports from Australia and the US at home, but have the potential to do so on a global scale.

Of course, such success hasn’t happened overnight. BurgerFuel, Les Mills, Harcourts and the rest didn’t spring fully-formed from their founders’ brains. The original entrepreneurial gambles became successful franchises through the input of others – franchisors, consultants, lawyers, accountants and many more – who willingly shared their experiences and created a local infrastructure to support the development of a brand new sector.

So perhaps now would be a good time to push for recognition of the pioneers who helped to develop franchising in this country. By freely giving their time they gave others a hand-up, created a huge and economically vibrant industry and, in the process, helped to educate and organise the small business community. Surely that’s something truly worth honouring?

This article was first published in NZ Business, March 2014

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