Graham Billings, executive director of the Franchise Association of New Zealand.
Graham Billings, executive director of the Franchise Association of New Zealand.
Graham Billings, executive director of the Franchise Association of New Zealand, recalls receiving a call a few years ago that illustrates a key point about success as a franchisee.
"Someone rang me and said they wanted to get rid of their franchise because it wasn't working for them," says Billings. "He told me he had a bakery, and I said 'what's the problem?' He said 'we thought the bread would be delivered to us at 8am so we could open for business at 9am, but then I find out I have to get up at 5am and start baking'. That was an extreme case, but the underlying point is you have to understand what you're buying into."
Taking the time to establish if there's a good personal fit with the business you're buying into is crucial for success as a franchisee, he says, as is gaining a solid understanding of what franchising actually is, doing careful due diligence, and then working hard 'on' the business as well as 'in' it.
Billings says there's currently growth in the number of franchisees in New Zealand, with sectors such as mobile food and coffee, professional services, and building and renovations showing particular buoyancy.
ASB's head of franchise, James Phillips, agrees overall the franchising market is reasonably strong at the moment, and notes prospective franchisees appear a bit more discerning - often considering several franchised businesses opportunities before they find the right one for them.
"A stronger economic climate usually makes people feel more confident to get into business on their own, and franchising is often seen as an attractive option - providing a business opportunity that has already been commercialised, says Phillips. "Also, good franchisors will take time to test and review the business model to try and mitigate the risks often associated with business startups."
Billings says that while some people do get into franchising essentially to buy themselves a job, especially at the lower end of the investment scale, new franchisees need to realise they are becoming business owners, and that will mean working far beyond nine-to-five hours if they want to be successful.
It's a point emphasised by Irshad Ali who, with his wife Shema, bought a Crest Commercial Cleaning franchise in 2011.
The couple originally took on the franchise on a part-time basis to see how they would go, working nights in their business while both still holding down full-time day jobs.
"It was quite hard keeping up with working night and day, but when we saw what we were earning in that part-time franchise, after about four months we said 'it's about time to give up the day job'," says Ali. "I liked that the harder you worked the more you could earn - it was very rewarding."
The Ali's franchise now has three staff, and Irshad also trains new franchisees as an Auckland regional trainer and assessor for the company. This means at times he's juggling training commitments during the day, along with running a business where work gets done at night. During those times he takes on more of a supervisory role with his team, but "you do also need to be dedicated and be prepared to work hard", he says.
Kris and Lisa Burn have owned the Harrisons Carpet franchise in Hobsonville - which last year was named franchise of the year from among the 48 in the Harrisons franchise group - for more than two years. Kris Burn says working long hours when needed is a key to success.
"I'll regularly go back to a customer two, three or four times to show samples, or go back in the evenings to show samples to a husband who might not have been at the original consultation," he says.
I like to refer back to my baking days, where if you have a successful recipe and you follow that recipe, you'll end up with a good end product. It's the same with a franchise: if you have a system and you follow that system, you'll have a successful business.
Prior to owning the Hobsonville franchise, the couple owned a Harrisons franchise in the Napier area for more than three years, after moving from roles working in big companies. Burn had been a baker for 10 years for Goodman Fielder, where he ended up being a manufacturing manager, and says a key factor in their success as franchisees has been following the franchisor's process.
"I like to refer back to my baking days, where if you have a successful recipe and you follow that recipe, you'll end up with a good end product. It's the same with a franchise: if you have a system and you follow that system, you'll have a successful business."
For Steve Verkley - who owns the Robert Harris Cafe in Te Rapa, Hamilton, with his wife Korina - finding that 'personal fit' with the business that Billings describes has been one of their keys to success.
"Both Korina and I love what we do, and when you can find something like that, it's not really work," says Verkley. "We've also been able to create a lifestyle that gives us a degree of flexibility, because Korina can work hours to suit the children - we have two young boys - and if we want to take days off during the week we can."
The couple bought the franchise in August 2013, and won the Rookie of the Year award at the 2014 Robert Harris Cafe Franchise Awards. Working closely alongside the franchisor and other franchisees in the network to help strengthen the brand as a whole has been another key to their success, he says.
"I think another factor is we work both 'in' the business as well as 'on' it to make sure we exceed our targets - both operational and financial. We came into the business with a focus on building a solid reputation and growing a base of loyal customers, and that's been an ongoing focus for us."
Graham Billings, Franchise Association of New Zealand
Graham Billings is executive director of the Franchise Association of New Zealand, whose membership includes around 30 percent of the franchise groups in New Zealand.
What are some of the factors people should consider if they want to take on a franchise business and be successful?
One of the first factors is people need to look at themselves and understand their reasons for wanting to become a franchisee and whether those actually match reality. I had a classic case a few years ago when someone rang me and said they wanted to get rid of their franchise because it wasn't working for them.
He told me he had a bakery, and I said 'what's the problem?' He said 'we thought the bread would be delivered to us at 8am so we could open for business at 9am, but then I find out I have to get up at 5am and start baking'. That was an extreme case, but the underlying point is you have to understand what you're buying into.
Some people do get into franchising essentially to buy themselves a job, especially at the lower end of the investment scale, but you do need to realise you're moving into owning your own business. To really get a franchise working you're going to be working a lot more hours than you would in a nine-to-five job and probably weekends if you're really going to succeed, and that can also put a strain on a franchisee's family.
The other thing to consider is whether you're comfortable working within the operational confines of the franchise manual. You really have to be the right breed of person - you've got to be entrepreneurial, but not too much.
What are some common pitfalls you see franchisees falling into?
It's that not establishing if they're the right fit personally with the business, as well as a lack of understanding of what franchising is. I use the analogy that buying a franchise is like leasing a building; if you lease a building for seven years and after a couple of years you want to get out of it, you can't just hand it back to the landlord.
I do see franchisees who, for one reason or another, want to hand back the franchise, and I say 'you bought that franchise for a number of years and made a commitment to pay franchise fees for that period and unless you can find someone else to buy it from you, you're liable'.
That leads me to one of the biggest problems that people fall into and that's not doing proper due diligence in the first place. I hate to think of the number of people I've had on the phone over the years who have found themselves in a state because they took no professional advice before going into their business.
What are some of the trends you're seeing generally in the franchise market in New Zealand?
One of the things about New Zealand is we have a much higher level of service franchise systems than in many other countries. That's partly because of our desire to get out in the weekends and do sports or get out on the water, so we don't want to be tied to home doing the lawns or cleaning the pool.
But some of the sectors that are starting to trend now are certainly mobile food and coffee, which seems to be growing quite quickly. We're also seeing a lot of new professional services franchises - things like accounting - or health-related franchises, or those in the building and renovations sector.
What would be your top tips for someone wanting to be successful as a franchisee?
1. Do the Franchise Association's pre-entry online training course. That's a free course you can download from our website, which we developed with Massey University. It gives you a huge amount of information about things you need to ask in order to potentially make a success of being a franchisee.
2. Think widely about what it is you you want to do, and also what you can afford to do.
3. Do all the recommended due diligence, including talking to other franchisees in the system, and once you've made your decision use professionals who understand franchising to add value.
4. Finally, once you've bought it, apply yourself because it is your business.
Coming up in Your Business: When, why and how do entrepreneurs come up with their ideas? And how do they turn that initial idea into reality? If you've got an interesting story to tell about how you came up with your business idea, drop me a note: nzhsmallbusiness@gmail.com
