Taking a quantum leap

With more than 350  franchise systems serving a population of just four million, New Zealand has more franchises per capita than any other country in the world. Perhaps surprisingly, some 70 per cent of these franchises are home-grown. Yet, 25 years ago, franchising was almost unknown here. So, why has it grown so fast?

"New Zealand has always had a huge tradition of small business, with some 85 per cent of all businesses employing fewer than five people,'' says Simon Lord, editor of Franchise New Zealand magazine. "But in the past 10-15 years, it has become more and more difficult for small operators to compete with the big chains."

"For example, The Warehouse has had a major impact in many communities. We are seeing supermarket buying and marketing power increasingly concentrated in the hands of a single organisation. In addition, a lot of retail is now concentrated in malls, and it can be difficult for independents to secure sites in such locations because mall owners often prefer a mix of proven names."

"The franchise model offers a way for small-business owners to fight back. Franchising combines the buying power, research, systems and branding of a big company with the local management and financial investment of the individual owner/operator. It's a very effective way for small business to compete with big business."

Mike Henderson, of Paper Plus, agrees. The new chairman of the Franchise Association  says Paper Plus  is a prime example of the power franchising gives the small operator.

"From small beginnings as a buying co-operative in the 1980s, Paper Plus has developed into the largest franchise of its kind in the Southern Hemisphere. That gives each individual store owner a huge advantage in competing with internationally-owned companies such as Whitcoulls, and the same benefits apply to many other franchises, too."

That applies equally wherever the franchise originates from. Subway may be a US company, but the people who own and operate your local outlet are Kiwis who have invested their own money in their own business.

In addition to proving particularly attractive to New Zealanders, franchising is also enjoying huge growth worldwide. "At the recent meeting of the Asia Pacific Franchise Confederation held in Auckland, all the delegates reported increasing numbers of franchisees,'' says Mr Henderson. "In fact, many governments, such as China, Malaysia and Singapore, actively encourage franchising as a way of getting people into effective business ownership.''

Eastern Europe and parts of South America are also developing burgeoning franchise sectors.

While franchising in its modern form was developed in the US in the 1950s, it  started to take off in New Zealand after international brands like McDonald's and local pioneers such as Fastway Couriers, Rodney Wayne and Stirling Sports started operating in the 1980s.

But it was in the 1990s that Kiwis really took to the concept, with new names such as Green Acres, Crewcut and Mr Green popularising home services and making the idea of self-employment through franchising a reality for many.

Since then, franchises have been developed in all sorts of industries, from gyms and computers to mortgage broking and bookkeeping. The Franchise Association says sales through franchises now account for well over $10 billion a year in New Zealand and there are more than 14,000 Kiwi franchisees.