Callum Floyd details exactly why New Zealand is seen as one of the best possible markets to take your international franchise.
Interview by Kieran McLoone, deputy editor for Global Franchise
As both the managing director of Franchize Consultants, a New Zealand consultancy and chairperson of the Franchise Association of New Zealand (FANZ), Callum Floyd is deeply immersed in what makes this attractive market tick.
Could you outline how the FANZ supports franchisees currently operating within New Zealand, and also how it assists newcomers to the market?
CF: The Franchise Association of New Zealand (FANZ) is the peak body representing franchising in New Zealand. New Zealand does not have specific legislation governing franchising structure and management, so FANZ plays an important self-regulatory role with our mandatory Code of Practice and Code of Ethics. A key benefit to members is the status of FANZ membership, demonstrating members’ franchisee-friendly commitments made in order to achieve and maintain FANZ membership status.
FANZ advocates for member issues, which has been particularly important during recent COVID-19 times, but also in relation to various legislative proposals. FANZ also provides regular networking, learning, and development opportunities by way of webinars, regular meetings, training, and a national conference. In addition, FANZ operates an annual awards evening recognizing franchising leaders and undertakes surveys on franchising’s size, composition, and contribution. This is supported by marketing benefits by way of direct membership and strategic partnerships.
Companies coming to New Zealand should contact FANZ for insights. The FANZ team can provide background and make introductions to experienced franchisor and service provider members, such as consultants, lawyers, accountants, banks, publishers, and brokers – helpful to would-be entrants into the New Zealand market.
What are some of the key guidelines laid out by the FANZ Code of Practice?
CF: Franchisor members are required to uphold the Code of Practice, and key requirements relevant to franchisees include:
• Providing a disclosure document 14 days prior to signing a franchise agreement
• Encouraging legal and financial advice
• A seven-day cooling-off period
• A simple dispute resolution process and the ability to complain about a member
• Continued adherence to the Code of Practice and the Code of Ethics
From an outsider’s perspective, what makes New Zealand an attractive market for franchising?
CF: New Zealand is an attractive international market for many reasons. Perhaps foremost, New Zealanders understand franchising ownership, with the highest levels of franchisors and franchisees on a per capita basis. That means strong brands with strong investment propositions have a good chance of attracting local investors. A little over 20 per cent of New Zealand brands are international.
New Zealanders are also known for having an international perspective, with a large proportion having worked, lived or regularly holidaying overseas. There is also a rapid adoption of new ideas, technologies, and trends.
New Zealand also has strong GDP per capita (US$42,084), average income (US$34,000), and simple business laws. Also, depending on your niche, there may be a relatively benign existing competitive environment – meaning good profit margin potential.
And finally, the great scenery, when combined with great people, cities, towns, and adventure opportunities, makes the New Zealand market a pleasure for international executives to explore and support.
Are the differences between Maori and European/Pakeha cultures within the country an important consideration for incoming brands, or is this negligible when marketing a concept nationally?
CF: Yes, definitely. Maori culture and history is very rich and appreciated in New Zealand. Equally, any incoming brands need to be respectful of all New Zealanders, their cultures, and beliefs.
This is important as New Zealand is becoming increasingly multicultural. The country’s ethnicities are diverse, with cultural affiliations defined by European descent (70 per cent), Maoris (16.5 per cent), Asian (15.3 per cent), Pacific Island (9 per cent), and Middle Eastern/Latin American/ African (1.5 per cent). In general, there is a strong unified respect and sensitivity to ensure all New Zealanders, including recent migrants, are recognized and treated as New Zealanders.
What are some of the most common methods that brands use when franchising throughout New Zealand?
CF: The two most common forms of entry into New Zealand are finding a master franchisee for the whole country, or franchising directly. Very few companies seek to appoint regional master franchisees, however, there are examples.
Domestically, most companies utilize single-unit franchising as the predominant model. There are also numerous multi-unit franchisees that have accrued units on a sequential basis. Area development is quite rare, but there are examples – including one of New Zealand’s publicly listed companies with rights for KFC, Taco Bell, and Carl’s Junior.
What challenges could brands encounter when entering New Zealand for the first time?
CF: New Zealand offers a lot of potential, but it must be approached with great care. Perhaps the most important consideration is that overseas companies need to recognize New Zealand’s small population of 4.9 million, that is geographically dispersed across our North Island (77 per cent) and South Island (23 per cent).
Both Islands, in turn, have a reasonable landmass of 268,021 square kilometers, which means international companies need to accept that their structure and support model may need to be optimized for New Zealand – in order to ensure a viable investment opportunity is available to all stakeholders.
Should Auckland be targeted exclusively, or is there potential in other areas of the country?
CF: Auckland, our largest city, does need to play an important part in any international entry strategy into New Zealand. However, franchising successfully in New Zealand, and creating great and sustainable returns for all stakeholders, will most often require a total market approach.
Also, it is important to recognize that many regional markets feature very strong unit-level returns, due to sometimes less competition coupled with lower operating expenses. A strong feasibility study will help understand what is required and help entry strategy focus.
