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Franchising model has plenty to offer

““Successful companies franchising tend to do so to both expand and develop a larger and more productive, efficient and profitable business than would otherwise be achievable.””

Dr Callum Floyd

While the Covid-19 pandemic has deeply impacted many businesses and workers Franchize Consultants has seen an increase in both companies franchising and individuals buying a franchise.

“Employees and some people who have been made redundant are increasingly looking toward some form of business ownership,” says Dr Callum Floyd managing director of Franchize Consultants and current chairperson of the Franchise Association of New Zealand.

“Franchising is a strong consideration provided the franchise is well established, proven and provides great support. In turn this increased interest is fuelling the growth of many brands,.’

Callum says that franchising is a very successful way of growing and improving a business, as proven by many household names in New Zealand (for example Columbus Coffee, Versatile, Green Acres, NZ Post and Harcourts), and globally (McDonald’s, Coca-Cola, InterContinental Hotels and Snap-on Tools).

“Successful companies franchising tend to do so to both expand and develop a larger and more productive, efficient and profitable business than would otherwise be achievable.

“All look to grow a valuable business by harnessing the many advantages franchising or licensing can bring such as access to capital for growth from franchisees, more motivated management by franchisees and group purchasing and marketing.”

Callum says that there is a good understanding of franchising in New Zealand and we have the highest-level of adoption on a per capita basis in the world with more than 600 brands and 35,000 franchised units.

Despite this many ambitious business owners are yet to explore the format, which Callum says offers many significant benefits compared to direct company-owned expansion.

But he notes several client companies have used lockdown time to stop and assess their long-term priorities and as a result a number have formally explored the feasibility of franchising, including how franchising should be structured for their business.

Yet franchising is not suited to every business wanting to expand. For companies considering franchising Callum, who has led franchise system development and improvement projects involving leading local and international organisations as well as authored franchising best practice and both Masters and Doctoral theses in franchising, says it is very important to work with a reputable franchising consultant.

“This helps to determine how franchising should be structured, what it can add and, if appropriate, establish and coordinate the many aspects of a franchise program needed to help make franchising successful.”

He advises that prior to embarking on a formal franchising assessment it is valuable to consider a number of franchising readiness considerations. He says the pilot business should have operated for a minimum 12-18 months (multiple locations are advantageous) and the business model should be unique, hard to replicate (by competitors, not the business) and backed by a protectable name and ways of doing things.

Other considerations include if existing operations, whether location or van-based, are profitable and yield attractive returns and whether there is sufficient access to financial and management capital to establish a successful franchising program and support the changing needs of a maturing franchise network.

Callum says that a solid process, encompassing a wider methodology and considerable specialised knowledge, is needed to approach franchising a business.

“So following a consideration of franchising readiness, a much more structured franchising assessment is the next step to suggest the path forward, be that continuing developments, working on required changes or improvements, addressing other options or doing nothing,” Callum says.

He says that franchising is a great opportunity for people in challenging times, such as Covid-19 has now thrown at many, and can lead businesses in new and exciting directions.

“If researched and developed properly to ensure sustainable franchisee and franchisor growth can be achieved, franchising provides ambitious business owners with great growth and business value building potential.”

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