FANZ Article: Issue 3#3

By Graham Billings, General Manager, Franchise Association of New Zealand

This article appeared in Issue 3#3 (March/April 2009) of Business Franchise Australia & New Zealand

New Zealand’s Review of Franchising Legislation

The Ministry of Economic Development's call for submissions as part of their discussion document closed on 21st November 2008 and they are now available on line at the Ministry's web site A total of 32 submissions were received and with the exception of five submitters who have requested confidentiality, all of them can be downloaded from the site.

A quick analysis of the published submissions indicates that 16 are generally in favour of maintaining the status quo of self-regulation and of those in favour of some form of regulation, three submissions are related to the fuel and motor trades and a further four from the legal profession.

A number of proponents of some form of legislation draw attention to the imbalance between those franchise systems that are members of the Franchise Association and those who are not. Many of these submitters believe that any legislation should follow the current Association Codes and not to adopt an Australian-type regulatory regime, which many consider to be unnecessarily over-prescriptive and self-defeating.

Many of the submissions comment favourably on the Franchise Association's activities and our current Code of Practice and Rules as playing a valuable part in the development of high standards within the franchising community. With members of the Association already incorporating such subjects as proper disclosure, cooling off periods and mediation in their franchise agreements, we believe that the continued growth of our membership will address many of the concerns raised by the proponents of regulation.

With the change of Government at the end of last year, it remains to be seen how this review will progress and we await with interest the Ministry's response to the submissions.

Franchising in the Current Economy

In talking to our members over the last few months, it is clear that in some sectors franchisors are getting enquiries for more and better quality potential franchisees than ever before. This trend may well continue with the increased potential for budding entrepreneurs who are looking to use their redundancy money wisely, to realise the benefits of going into business for themselves under the umbrella of a proven franchise system. It is a recognised fact that the risk of business failure is reduced when buying into an established franchise system and in these uncertain economic times, it is probably a better way of investment in a new business. 

The franchising community is not going to be immune from the current economic climate, however, and attention to such things as smart purchasing of consumables, stock levels, cash flow and good promotion are going to be vital elements for success this year. The Association will be running a number of valuable seminars during the year that will focus on some of these and other issues and, of course, the Annual Conference in July will feature a top line-up of speakers whose knowledge and expertise will be well worth listening to.

One of the significant costs for a franchise, especially those operating in the retail sector is, of course, rental of premises. This is not just an issue in New Zealand but a world-wide one. A press conference recently held by Dr Mustafa Aydin, President of the Turkish Franchise Association, addressed the impact of the Turkish economy on franchisees, especially those operating in shopping centres. He said that there was a need to find common ground that will be beneficial for all parties concerned. Dr Aydin continued saying, "Customers tend to follow familiar names, not the shopping centre itself. If they are gone, then the shopping centre will automatically go out of business." Dr Aydin gave a strong message to shopping centres in Turkey that they should re-analyse rents and expenses billed to stores and to encourage promotions to increase the number of visitors.

Despite the doom and gloom in some sectors of the economy, others are still thriving and we have members whose businesses are still growing and thriving both with expansion in New Zealand and overseas, which just goes to prove that it's going to be an interesting year – one way or another!