by Simon Lord
last updated 06/12/2022
Where do you want to be?
by Simon Lord
last updated 06/12/2022
Buying a franchise enables you to start a new life almost anywhere – and regional businesses can be more profitable with less stress, too
As Krista Coningham, the new Westpac Supreme Franchisee of the Year, found, leaving Auckland for Marlborough offered many advantages, from financial freedom to family lifestyle.
And she’s not alone. All but one of the franchisee winners in the Awards came from outside our biggest cities and, according to our recent Prospective Franchisee Survey, almost a third of franchise buyers would consider moving to another region to take up the right franchise opportunity. Another 17% are undecided, so let’s have a look at the pros and cons of making a fresh start.
According to Philip Morrison of Franchise Accountants, ‘For a number of years now, we have been seeing more and more clients looking to sell up property in Auckland and move further afield to start businesses. They see it as an opportunity to improve their financial position overnight, reduce debt and improve their quality of life, and if they want to have their own business then cashing in on their property can make it very affordable.
‘If they are concerned about leaving the Auckland property market altogether, then keeping their property and renting it out can be a good option. They can almost certainly rent something in the regional centres much more cheaply, so they are reducing the burden of debt that the new business needs to support. In turn, that enables them to pay off any borrowings and improve profitability more quickly.’
Big bucks or bright lights?
Regional locations can hold another surprise for business buyers, too – they may not attract the bright lights, but they can bring in the big bucks. In fact, some of the most profitable outlets in many franchise systems are located in the regions rather than the major centres.
The key word here is ‘profitable’ rather than ‘highest sales’. Regional centres might have a smaller economy but they can produce better results. There are four main reasons for this:
1. Regional businesses often enjoy far better rent ratios than urban ones. The property market and rates in Auckland mean that many businesses need to have a significant level of sales before they even cover their costs. That’s why so many of the outlets on Queen Street are increasingly open all hours – they can’t afford not to be.
2. Although sales may be lower, so are staffing costs. Rent and staff are the two biggest costs for most businesses, which allows for lower fixed costs and greater profitability. Wages may be lower in the regions, although minimum wage rates are national, and there may be grants available to help people get off long-term unemployment and into paid jobs. All these factors add up.
3. In many sectors, there is less competition both from other franchised brands and from independents. While some independent operators may be excellent, most will be average and none will enjoy the buying and marketing power of a franchise, and the operational support that goes with it.
4. It’s also important to realise that because other costs such as housing are lower in most centres, franchisees don’t need to take as much out of the business to cover their everyday living costs. This means they can reduce debt faster and re-invest as required.
All these benefits add up – and when you add in the double disadvantages of city property prices and all-day traffic jams, the appeal of regional businesses becomes obvious.
The franchise advantage
Of course, all these factors apply to non-franchised businesses just as much as franchised ones, but franchises have additional advantages. For a start, no matter what the size of the business, you’ll still get the same level of training and support from the franchisor, because that’s what franchises do.
Even if you have a small retail outlet in Whanganui, you’ll only be paying the same for your goods as an outlet five times the size in Sylvia Park, because that’s how franchises work – they pool their buying power. You’ll have more security of supply, too, and while regional locations can mean higher freight charges, many franchises have good national deals in place.
And you’ll have the benefits of combining a nationally-known brand with truly local ownership – something that creates an incredibly strong business profile, as Caci franchisee Krista will confirm.
Where to go?
Deciding to leave the city is one thing – deciding where to go is another matter entirely. Some people will choose to move to areas where they have family or other connections, which can be an important factor in feeling at home in a new community. Lifestyle preferences are also important: if you want to be near good beaches, or good fishing, or ski fields or hunting, this needs to play a part, too.
As networking is an important factor in growing many businesses, it can be an advantage to know people in the area you are moving to, whether through existing family, children’s activities, sports or hobbies. On the other hand, as many franchisees have found, operating the local café or cleaning business can be a great way of getting to know people and making new friends.
Another good reason for selecting a particular area might be that the franchise you are particularly interested in has a good location available. Look through our magazine and you’ll find plenty of franchises which are crying out for franchisees in particular parts of the country, such as Trident Homes in Kapiti, Napier/Hastings, Gisborne, Waikato and West Coast, helloworld in Canterbury, Marlborough, Northland and Whanganui, Pita Pit in smaller towns throughout New Zealand, SkyTech drones in agricultural regions and Landmark Homes in Northland, Nelson and Otago. And when franchisors say they have opportunities nationwide, they usually mean it – so if you like a brand, ask what locations are available.
Is it a good fit?
Finding the right location is always critical to the success of any new business, so if you are flexible about where you go and prepared to take an opportunity when it arises, you could find that it pays off.
That doesn’t mean that buying a franchise is a guarantee of success, though – you have to be certain that any proposed venture really is a good location on the right terms (see Understanding the Numbers). No matter how reasonable the rent might seem by city standards, you have to get the right number of people passing the door to make a business profitable.
And while many franchises, such as Caci, have different models for regional markets, such as smaller footprint or lower capacity stores, some don’t. While a small town such as Tirau might support a far larger café than the resident population would justify because of its massive traffic flow and popularity as a refreshment stop, other locations require more compact (and cheaper) designs.
How to get there
If you’re looking to make the change from city living, then, or want to move closer to friends or family in another part of the country, buying a franchise may offer the opportunity you’re looking for.
Here are some big questions to ask yourself. Once you’ve answered those, go here to see our Directory of over 275 different franchise opportunities. You’ll be amazed at just what’s available!
- What do I want to put into and get out of life?
- What does my family need and want for a good lifestyle?
- What would I need to pay to rent or buy a suitable home?
- How much capital could I release from my home to put into the business?
- Does the region have a suitable market for my chosen franchise?
- What is the competition? Is there much opportunity for growth?
- Is there the infrastructure we need for education, sports we enjoy, leisure activities, culture?
- Are there work opportunities for family members if they are not involved in the new business?
- Do we have family members/old friends nearby?
- Would we fit in the local community? How easily do we make new friends?
- Is this a good time for children to change schools?
- What opportunities are there in the new area for lifestyle changes? eg. less time commuting, more time for family or favourite hobbies.
- Is this a region I’ve visited and thought ‘I could live here’?
This article appeared in Franchise New Zealand magazine Year 31 Issue 4, December 2022.
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