Franchising New Zealand 2012 Survey
As the principle sponsor of the second biennial survey of New Zealand franchising, the FANZ is pleased to be able to bring you some of the key findings of the Franchising New Zealand 2012 survey, produced by Massey University, Auckland, in association with the Griffith Business School, Queensland.
Total number of franchisors in New Zealand
It is estimated there are 491 business format franchise systems currently operating. Of these, 88 per cent are home grown NZ franchise systems.
The net growth between 2010 and 2012 of 23 franchisors is accounted for by the emergence of new franchise systems and the exit of others. Amongst the latter group were identified around 27 systems no longer in business.
Total number of units in New Zealand franchise systems
There are an estimated 19,300 business format franchised businesses and 3100 company owned units, or in total 22,400 units operating in business format franchises in New Zealand. Most would be classified as small or medium sized businesses (SMEs), thus representing around five per cent of all SMEs in NZ (total 457,374, a drop of 1.7 per cent on previously reported figures).
Growth of franchised units in New Zealand
The Franchising New Zealand 2010 survey estimated 23,600 franchise units in total. In 2012 the estimate of 22,400 units shows a decline over the past two years. The number of systems in the sector has therefore contracted, possibly owing to the continuing effect of the economic environment.
Turnover of the New Zealand franchising sector
Turnover of the franchise sector delivers an important measure of the contribution of franchising to the New Zealand economy. The total sales turnover of business format franchise units was estimated at $6.9 billion in 2003. In 2012 we can estimate annual turnover of the New Zealand franchise sector between $19.4 and $21 billion based on the following:
• Turnover from respondent sample $6.03 billion
• Publically available turnover of New Zealand’s franchised supermarket duopoly $13.4 billion.
Franchisor activity levels
Over 50 per cent of the respondent franchisors reported an increase in revenues from sales over the two years. However, in a progressively competitive environment, overall profit margins declined for more than 25 per cent of them. Franchisors still actively sourced new franchisees despite a lack of suitable funding for new franchisees. For just under 50 per cent of franchisors, an increase in existing staff training and education provided a useful strategic response to challenges faced. Continued difficulties in the business environment impacted franchisees by decreasing profitability, although 80 per cent of franchisors in the sample reported that their franchisees were operating profitably. Amidst fierce competition, franchisees are making every effort to reduce costs by being operationally efficient and decreasing staff numbers.
Employment in the New Zealand franchising sector
The total number employed in New Zealand business format systems is estimated to be 101,800, of whom 54.4 per cent were permanent full time, 38.3 per cent permanent part time and just 7.3 per cent casual employees.
In 2010 it was estimated that 80,400 people were employed in the franchise sector, the majority in permanent full time positions; fewer than a quarter in part time employment and the small number in casual positions. There has been a shift in the employment profile in 2012. It is estimated that there are now more than 100,000 employed in the sector, but only just over half in permanent full-time, with a significant increase in parttime and casual positions.
Substantial disputes (those referred to an external advisor for action) were experienced by 19 per cent of franchisors, but only four per cent of franchisees were involved. The main cause, as in 2010, was noncompliance. Other areas of dispute involved franchisee profitability, site suitability, and support issues. Consistent with the findings of the last survey, more franchisors than franchisees initiate dispute proceedings.
The full Franchising New Zealand 2012 survey can be downloaded from the franchise Association of New Zealand web site www.franchiseassociation.org.nz