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The franchise sector is more resilient than ever - that’s the result of new research showing strong growth over the last three years.
Massey University’s latest Franchising New Zealand report shows that the sector grew by $10.4 billion since 2021, up to $47.2b in turnover.
This growth is largelydriven by an increase in the average turnover of the respondents by 20.5%.
Significant revenue gains by large players such as Foodstuffs North Island also contributed.
Massey Business School pro-vice-chancellor Professor Jonathan Elms said the sector has had a remarkable recovery from the pandemic.
According to the survey, there are an estimated 546 business format franchisors in New Zealand comprised of 27,295 units. Of the 546 franchisors, 115 submitted usable responses to the survey, up from 97 in 2021.
Despite a growth in turnover, the number of total units has decreased since 2021 by 9%.
Massey Business School pro-vice-chancellor Professor Jonathan Elms highlighted that while the number of identified franchise brands has decreased, the sector’s adaptability has helped them grow.
“New Zealand franchisors are embracing growth opportunities, focusing on product and service diversification and leveraging digital solutions to enhance operations and customer engagement,” Elms said.
“We are grateful for the large number of franchises who participated and the depth of valuable insights provided.”
Franchises classed as other services (including personal care, pet care, auto repairs, and IT services) made up a quarter of respondents to the survey.
Retail franchises made up 18% of respondents, followed by administration, accommodation, and construction franchises.
Longevity crucial
Stability appears to be a key reason for the sector’s recent success, with 80% of franchise businesses operating for over a decade.
The median number of units per franchise has reduced slightly, down from 24 in 2021 to 22 in 2024.
Medium and large-sized franchise systems have both declined in number, as small systems (those with 0-20 units) have grown.
Importantly, franchise start-up costs have decreased by 20% since 2021, with the median cost now $120,000.
As for where franchises are looking to grow investment, artificial intelligence appears to be key.
Robyn Pickerill, chief executive of the Franchise Association of New Zealand. Photo / Supplied
Chief executive of the Franchise Association, Robyn Pickerill, said optimism was rife throughout the sector about how it can be used.
“They want to utilise it in their customer service operations, in streamlining customer service feedback and to innovate how they offer services,” Pickerill said.
More than 70% of survey respondents are either already using it, or planning to implement it into their operations.
Respondents also shared a preference for domestic franchise systems, with 73% locally established.
The survey estimates more than 114,300 people are employed in a franchise after extrapolating data from respondents, a significant change from the last survey.
Interestingly, the number of contractors within the respondents’ networks more than doubled, rising to 13,837.
As part of fostering community, half of the respondents had implemented diversity, equity, and inclusion policies for both employees and franchisees.
Community engagement by franchise businesses has also flourished, with almost 90% contributing to community causes through donations, sponsorships, and other means.
Pickerill recognises the challenges facing many businesses across the country, including rent, inflation, and low consumer confidence.
On labour challenges and immigration, Pickerill believed that recent regulation changes have helped reposition the sector on a level playing field.
She remains concerned about the slowness of the system in processing new applicants, alongside accreditation technicalities that can cause issues for migrant workers.
However, Pickerill is confident that as the economy steadily recovers thanks to changing economic headwinds, including OCR cuts, consumer confidence and spending will rise again.
“There is a general optimism and resilience amongst the franchise brands out there, and they’re looking for a more optimistic future next year,” Pickerill said.
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.
