Focus on SMEs: Brighter economy boosts franchise

Daniel Cloete, franchise banker for Westpac. Photo / Supplied

Aucklanders are warming to the idea of buying franchises after a couple of years with their hands in their pockets, experts say.

Simon Lord, publisher of Franchise NZ magazine and website, said he had noticed a considerable increase in interest in both over the past six months. "Interest runs ahead of purchase. One banker told me they had a record month last month."

Lord said it was a sign of increasing confidence in the economy.

"People have not wanted to make investment decisions [during the downturn] but now people think things are improving and they are fed up with waiting to make decisions on their futures."

Lord said franchised businesses that had grown during the recession, or even just kept their heads above water, were well placed for future growth now things were looking brighter.

"They've made changes to make their franchise models more effective. We've been through the phase where franchisors are putting their efforts into supporting existing franchisees. Ones that have grown in or just survived the recession have good, robust business models."

Daniel Cloete, a franchise banker for Westpac, said he had noticed a big increase in franchise activity, but it was limited to the greater Auckland area. He said the economy was still slow in other centres.

In Auckland, though, businesses were expanding. Lord said landlords were also more realistic in lease terms, which helped businesses start up.

Cloete said: "Franchisors have quite aggressive growth plans."

Graham Billings, of the Franchise Association, said research indicated there was a more positive outlook this year among businesspeople. Banks had told him they were more positive about lending to franchises with established records. "But we still say the two key things that are preventing fast growth are access to finance and finding suitable franchisees."

His association was talking to the Government about a proposal for a small-business growth scheme that would help people to buy small businesses.

Cloete said Westpac lending criteria had not changed in the recession but people had found it harder to borrow because of lower sales figures and flat property values.