by Mina Phillips and Simon Lord
last updated 30/09/2019
Exporting Kiwi Know-How
by Mina Phillips and Simon Lord
last updated 30/09/2019
Mina Phillips and Simon Lord look at how two New Zealand franchises are expanding overseas.
New Zealand may be a small country, but we’re good at dreaming big – and not just in sport. Two local companies have recently taken their franchise models overseas with considerable success. Refresh Renovations and Dream Doors don’t sell trendy food or fashionable online services; instead, they focus on practical solutions to real needs.
Launched in 2010, Refresh offers homeowners a unique project management system that would help to reduce project overruns and budget blowouts. Recognising that there was no single national brand that specialised in renovation rather than new builds, local business strategy and marketing firm Traffic developed the franchise to fill the gap. Once it was established in New Zealand, the company directors saw an opportunity for global expansion. Today, Refresh Renovations has franchises across New Zealand, Australia and the United Kingdom, and has recently launched in Pensacola, Florida.
Dream Doors was originally founded in the UK, but when co-founder Derek Lilly split with his original partner, he retained the rights for New Zealand, Australia, the US and Canada. Dream Doors specialises in kitchens and fits replacement doors, surfaces and fittings to restore a home’s looks without the cost and wastage of building new units. Derek decided to settle in New Zealand and opened the pilot Dream Doors here in 2008, expanding to Australia in 2014 and the USA in 2018. The company is completely separate from Dream Doors UK.
So how have these two businesses taken New Zealand franchising to the English-speaking world?
Build a strong foundation
According to Traffic director and Refresh co-founder Chris Caiger, it all starts with a good foundation. ‘We spent two or three years piloting first and once we got that sorted out we started rolling out seriously in New Zealand. You learn a lot when you’re piloting. We changed some quite fundamental things, including the type of people we targeted as franchisees.
‘When we first started out we assumed that the natural franchisees would be builders because they already knew the market. The idea was we would wrap all of these sophisticated management systems around them and teach them to be managers. As it turned out, we found out that most builders have become builders because they don’t like all that management stuff. So we reversed the model and looked for people with commercial capabilities who would hire builders in their construction team. That way, the builders could get on with what they were good at and we had successful managers who could run a business unit.’
Although Refresh was a new business, Traffic’s experience provided a springboard for success. ‘We had 15 years’ worth of relationships with the main leaders in the building industry, so we already had very strong networks, relationships and a strong reputation,’ says Chris. ‘We were able to leverage that into our franchising business.’
While this initially applied to finding the right connections to help Refresh grow as a business franchise within New Zealand, it also helped that the company’s co-founders had people they could reach out to overseas when the time came for international expansion.
‘All of our expansions have been based on contacts,’ says Chris. ‘A lot of the early Refresh investors have been senior managers in corporates, so we’ve got very good networks. Those networks are how we have found successful master franchises in other countries. If we hadn’t had those it would have been very difficult. There was nothing available through any government agencies that could help us in any useful way.’
At Dream Doors, Derek Lilly also values the importance of networks but he had to build his own. ‘Coming from the UK I didn’t have those networks in place, but the Franchise Association here (FANZ) was super helpful in putting me in touch with the right people, advisors and specialists who could help as we got set up and grew.
‘When we started looking at the USA, they also helped with introductions when I attended the conference of the equivalent association there, the IFA, and I found the same thing. If I had a question – and I had lots – they’d find someone to give me the answer. It can be a very expensive process to find out who to talk to otherwise.’
The need to comply
Before Refresh made the leap into international waters, the company first needed to ensure that it was working well within New Zealand.
‘Once we proved that, we then had to prove that we could transfer it to another country, with Australia being the obvious destination,’ says Chris. ‘The advantage of Australia is that it’s close to New Zealand and many of our contacts and suppliers already operate there. But Australia is probably the hardest market in the world. It’s got the highest regulations in franchising, the highest regulations in building, and every state has different legislation.
‘By comparison, New Zealand was a relatively easy market to develop in, then we put the model through the fire in Australia to prove we could take it to the rest of the world. Once Refresh was strongly established over the Tasman, we knew we had the right kind of processes to go international.’
Derek agrees. ‘In Australia, like the USA, there’s both federal and state-based regulation of franchising, so you need to find a good lawyer with plenty of experience who really understands the franchise legislation there. We knew that the concept had already successfully transferred from the UK to New Zealand, although we had developed totally new marketing and support systems here, but operating in a new legislative culture is a challenge. We also enlisted the help of a local franchise consultant to help tweak our marketing and, especially, learn how to attract people. Wherever you go, without on the ground experience in franchising, you’ll get your arse smacked. If you do your research carefully to find the right consultant, it needn’t cost a huge amount of money.’
Know the market, find the partners
The Refresh team ensured they really understood each market they were entering. ‘Our Traffic background was helpful because we were an international research company,’ says Chris. ‘With our backgrounds, I would say we knew more about the building industry around the world than almost anyone, but the data available varies enormously. Places like Australia and America collect data better than New Zealand, so we were able to access good quality market information to help us make the right decisions.
‘The other key factor is finding the right partner. By appointing a master franchisee who is local to the particular location you will be launching the business in, it means that you, as the owner of the company, won’t need to be running the business from between countries: instead, the business will benefit from being run by someone local who has invested in the business. That way you also get the “soft capital” of people who understand the culture and how that market works.’
Derek Lilly agrees. ‘Master franchising was clearly the way to go for Dream Doors. For Australia, we had a very successful franchisee in New Zealand who was keen to expand. He knew our system and was keen to set up in Australia, so we appointed him as master franchisee and he moved there. Five years later, we have almost 40 franchisees there and it’s going very well.
‘The USA was a different matter. We spent four years investigating the market there before we actually opened with a master franchisee on the ground in California, and they are so keen they have actually taken a stake in the parent company we’ve set up for the USA with a board of highly-experienced local businesspeople. In the first year we’ve appointed 7 franchisees in California and we have a further 36 under offer, which shows how strong the potential is.’
Chris says that because Refresh had already expanded to Australia and the UK, taking the franchise to the USA was not such a challenge as it would otherwise have been. ‘Being from New Zealand is definitely an asset: the New Zealand brand is very, very strong in the US. Lord of the Rings definitely put us on the map in the most incredible way and New Zealanders have a really good reputation for being hard workers, innovative and smart.
‘Maurice Williamson, who’s now New Zealand consul-general in Los Angeles, told us that the New Zealand brand is running hot in America and that now is a particularly good time for companies to look at opportunities there.’
Get the right supply chain
Establishing a reliable supply chain is vital to the success of any overseas expansion. Refresh says that while many businesses aim to succeed by squeezing suppliers on costs, their approach was a broader one. ‘We wanted to be able to offer customers the best value for money, but we also wanted to work with suppliers who would be an asset to our brand,’ says Chris.
‘That meant we weren’t just looking for the lowest price – we wanted people who would work to help us grow our business through marketing, through networks, through advice. We certainly wanted a good competitive price but we didn’t want to squeeze them to a point where they didn’t really have the margin to provide other services which could help our franchisees succeed, such as marketing and lead generation.’
When virtual is reality
Refresh says much of its success comes down to systems and processes. The company has IT systems in place which help franchisees to manage each stage of a project. Online platforms allow customers to access photo updates and important documentation, and the franchise also relies on the marketing and business strategy specialists at Traffic, who work behind the scenes to ensure everything runs smoothly while the business continues to grow.
‘The whole franchise model really works on scale,’ explains Chris. ‘For us to be successful, we have to have the best IT systems, the best marketing, the best processes, systems and so on. As a little local company there’s only so far you can go on that but as an international company, you can afford to invest more so you can really become truly world class in your foundational systems.
‘When we were first set up we had a server-based IT model,’ Chris recalls. ‘But when we decided that we really wanted to go international we realised we had to go cloud-based. So all of our systems went on the cloud, making our marketing web-oriented. Our franchise business management system is delivered on the cloud. Our franchise recruitment was delivered on the cloud. So we built our core platforms on the cloud to make it easy to go international in a sustainable and essentially risk-free manner.
‘Most companies, when they go overseas, have physical assets they’ve got to either invest in overseas or take with them, like stocks or warehouses. But as a franchisor with local master franchisees, our assets are mostly IP and virtual. It makes it much more affordable because you’ve got no big investment costs to move offshore. All of our head office is based in New Zealand, so to expand overseas all we had to do was to switch on the overseas version of our cloud systems and hire a local manager.’
Derek says that Dream Doors has also invested heavily in cloud-based technology. Its award-winning online Franchise Management System (FMS) was developed in New Zealand not just to provide franchisees with a mass of real-time marketing and management information, but also to provide several touch-points to customers which enable the franchise to ensure brand standards are upheld.
‘It’s something we created after a bad experience with an early franchisee and we have gone on developing it ever since,’ says Derek. ‘It’s been a massive benefit in going overseas – apart from enabling us and our franchisees to see what’s going on in their businesses, it’s knocked the socks off everyone who’s seen it, including some of the top franchise advisors in the USA.’
But ideas are not one-way traffic. ‘One of our advisors in the USA is a marketing professor from Stanford University, who was heavily involved with the California Closets franchise,’ says Derek. ‘He got us to poll all our customers from the previous 12 months asking what difference our kitchens had made, and people told us it had changed their lives – they were preparing and sharing food with families, friends and neighbours. As a result, we understood our why, and not only changed our marketing – we changed our whole brand in the USA to Eat Gather Love.
‘Has it made a difference to sales? Oh goodness, yes! Our marketing strategy is now based around building happy families one kitchen at a time, rather than incentives like discounts or free sinks, so our margins are better, too. Now we’re integrating that learning into our system in Australia and New Zealand, too, for the benefit of all our franchisees.’
Go for it!
Confident in their expansion process, Traffic has launched two additional franchise businesses which are also headed for global expansion. Zones Landscaping will soon launch in the USA, while Refresh’s newest franchise, Oncore, has recently launched in New Zealand using the same processes and models.
Chris’s advice to local franchise businesses is to take an innovative and responsible approach to international expansion.
‘We’ve set things up so that we’re not putting stress on our home business by going overseas. Don’t be too scared about it, but do take the time to prepare it properly and do your research.’
This article was first published in Franchise New Zealand Year 28 Issue 02.