HEADWINDS AND TAILWINDS

Franchising pulls one heck of a punch in New Zealand's business landscape. Using government statistics and the Franchising New Zealand survey data (both from 2024), business format franchises can only represent about 5% of all small businesses in the country, yet contribute 11% of GDP - excluding motor vehicle sales and fuel retail. In contrast, the remaining 95% of small businesses contribute about 31% of New Zealand's total economic value.

Franchises are clearly among the top performers in New Zealand's small business sector, so when there are encouraging reports of rising business confidence and sales activity, and reports of increased sales of businesses across the country, the chances are high that franchises are leading the way.

So where are the headwinds and tailwinds for franchises in terms of sales - whether that's recruiting new franchisees, or maximising business activity for your existing networks?

Business confidence and inflation

A franchise-specific confidence survey is conducted annually at the beginning of each year by Franchize Consultants Ltd. It's findings are usually strongly consistent with those of broader business confidence surveys. The July 2026 ANZ Business Outlook reports a strong lift in business confidence, even allowing for the on-again-off-again "headwinds" caused by the Middle East conflict and its impact on fuel pricing and availability. Confidence in expected own activity has lifted in each of the past three months

A net 10% of the businesses surveyed reported actual activity rising compared to July 2025.  Retail businesses reported a drop in activity since this time last year, although this sector remains amongst the most optimistic of improvement ahead. Retailers are also less positive about the outlook for future employment in their sector, with the construction sector and services businesses expecting improved employment, profitability and own activity, but also predicting higher costs ahead of them.

Westpac senior economist Michael Gordon also commented on the Q2 Consumers Price Index report released last week, pointing out that core inflation is running on the higher side of the Reserve Bank of New Zealand’s inflation target. “That’s not an ideal starting point for the RBNZ as the economy starts to regain momentum, and underscores the case for removing some of the policy stimulus that was put in place last year.” Inflationary pressures remain another "headwind" for businesses, although it's looking more like a light breeze than the strong gusts of the past months.

Uneven sales recovery

Xero's Q2 Small Business Insights data showed strong growth in sales performance by small businesses, but with a heavy influence from the agricultural and construction sectors. Small business sales for the construction industry were up 11%, but from a relatively weak point in Q2 of 2025. The report points out that retail trade sales were up 6.4% year-on-year, despite concerns about the impact of ongoing elevated fuel prices on discretionary spending. Sales for combined services-based businesses increased 5.7% year-on-year but hospitality was the softest sector, with sales up just 2.9% year-on-year. Regionally, agricultural areas performed better than urban areas, but Auckland and Wellington still reported over 7% year-on-year sales growth for small businesses.

The Xero report says that in 2026 small businesses waited 24 days on average to be paid after issuing an invoice - well below the long-term average. Late payments also sit at 1.5 days below the long-term average of 6.5 days, showing that businesses in New Zealand are working hard to keep cash flow moving.

Businesses sold in New Zealand

ABC's latest Quarterly Market Intelligence Report shows a a 19% increase in completed sales of New Zealand businesses since June 2025. Relevant to those seeking franchise resales, the report has businesses on the market for a median of 135 days before selling and the average business sale price is reportedly up 16% on this time last year.

Buyer demand is only up 1%, so the volume of new prospective buyers entering the market is not substantially higher than last year and the report projects an easing of sales in the next 12 months from the immigration and unemployment "tailwinds" experienced over the past couple of years.

Business endurance

Prime Minister Christopher Luxon told a Rotorua business chamber meeting this week that they needed to be more "adult" about business performance, suggesting they move away from a mindset where businesses look to government for every answer, instead focusing on "re-tooling and radically disrupting" their businesses to ensure growth.

Labour's finance spokesperson Barbara Edmonds said the PM was out of touch and that business owners know how to run their businesses, “What they're questioning is whether this government knows how to manage an economy. Small businesses are the heart of our economy. These are people working seven days a week, risking their family savings, and lying awake wondering if they'll still be open next year.”

Despite political and media sensationalism, the hard data from the Companies Register shows the number of new business incorporations continuing its steady annual rise this year, and the number of annual business closures remaining static.

Even liquidations, receiverships and voluntary administrations average out to a remarkably similar annual rate across the pre-Covid (2,246 per annum) and post-Covid (2,266 per annum) years. The relatively higher numbers of the past two years have counterbalanced the low numbers recorded in the previous three years, when governmental support through the pandemic was generally recognised to have artificially reduced the subsequent number of business closures.

Ease of doing business in New Zealand

The 2026 annual EGS GlobalVue report released last week has New Zealand ranked second equal in the world (alongside Japan and Singapore and just behind Spain, the UK and USA) for the easiest countries in which to conduct business. The GlobalVue rankings are commonly used by international franchisors and investors to assess conditions in 40 countries when considering international expansion.

Our main strengths are considered to be:

• Political & Economic Stability
• Legal Concerns for international brands
• Overall Ease of Doing Business
• Ease of International Brand Entry
• Ease of Starting a New Business
• Corruption Index

Our main weakness is considered to be our market size, followed by projected GDP growth and ease of finding new investors/franchisees in 2026/2027. Overall, however, New Zealand remains attractive to international franchises which are proven to do well in smaller sized markets. Similarly, for homegrown franchise systems (about 70% of all franchises in New Zealand fall into this category), these rankings improve the chance of finding international investors when franchisors are looking for either international growth or system buyers.