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As a business model, franchising can be beneficial for all parties involved. When you are the franchisor, you offer your franchisees an opportunity to exploit your successful business operation and valuable resources. In return, your franchisees pay various fees while running their own installations of your franchise. It may be an advantageous business decision to grow your franchise into the New Zealand market. However, you should do appropriate research beforehand. This article will provide some background on franchising in New Zealand, and explain how you can bring your international franchise to New Zealand.

Franchising in New Zealand

Franchising is a popular business model in New Zealand. Many businesses may use it to grow their already successful flagship into a multi-installation operation. If you already have a successful franchise operating in your own country, you may find such success within New Zealand, where franchising is a tried, tested and popular business model. International franchises have previously found success here, and New Zealanders may engage with your international brand.

For instance, popular international franchises like Starbucks and McDonalds have successfully expanded their brands into New Zealand, with installations all over the country.

However, you need to conduct adequate market research to determine whether New Zealand is the right market for your franchise. For example, if you come from a country with a higher population density, you need to account for the differences in a smaller market like New Zealand’s. 

The Franchise Association of New Zealand (FANZ) is an organisation of franchise professionals that aims to promote franchising and provide support for franchisors and franchisees. Membership is not compulsory. However, it can offer valuable benefits and insights for you as a franchisor, particularly if you want to gain more knowledge about the franchising climate within the country.

Franchising and NZ’s Legal Climate

Unlike other countries, New Zealand does not have dedicated legal regulations for franchising activity. This creates a flexible commercial arena that can allow for growth. However, the laws that apply to all businesses will apply to your franchise when you sell to New Zealand customers and employ New Zealand workers. These include:

  • consumer law;
  • privacy law;
  • company law;
  • tax regulations;
  • employment law; and 
  • intellectual property law.

Therefore, when establishing your New Zealand franchising plan, you need to implement mechanisms for complying with these laws. Otherwise, you risk reputational, commercial, and legal consequences.

For instance, all consumer goods and services must comply with the Consumer Guarantees Act, which sets out minimum quality standards for traders. Additionally, there are certain requirements you must meet to set up a company in New Zealand, which is one of your options for expanding your franchise into the country. These include:

  • complying with annual reporting obligations;
  • having a physical location for the address of your business;
  • having at least one resident company director in New Zealand; and
  • other company-specific rules.

On top of that, members of FANZ have some other obligations. You must abide by the organisation’s Code of Practice, which sets out minimum standards for franchising in the country.

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Finding Franchisees in New Zealand

A large part of your establishment as a franchise in New Zealand will be finding the right franchisees. As an international franchise, you may not have the same level of control here as you would in your home country. Therefore, you need to find franchisees that you can trust have the business’ best interests at heart and want to grow.

Like other countries, there are many different ways to find franchisees in New Zealand. For example, these include:

  • looking at franchise expos and trade shows;
  • advertising online using franchising websites, email, or social media;
  • through organic referrals;
  • using brokers or franchise referral consultants; or
  • placing advertisements in local newspapers.

Choosing a master franchisee early on can make this process significantly easier for you. They are a local entity that you give more power, and they can appoint franchisees from the ground. Additionally, they will report to you regularly, and you can give them some of the responsibility of ensuring franchisees comply with local law.

Prepare Proper Documentation

There are no specific legal requirements for what documentation you need for your franchise. However, you should have a franchising agreement that outlines the contractual relationship with your franchisees. You should also draft a franchise disclosure document and operations manual. As an overseas party, you can better protect your franchise with robust contracts and documentation. To ensure that these are valid in New Zealand, you should also engage the aid of a local franchising lawyer.

Key Takeaways

Before expanding your franchise to New Zealand, you should conduct appropriate market research to ensure this is the best option for you. In particular, choosing a local master franchisee can provide you with valuable insight and help find other franchisees.

If you need help with bringing your international franchise to New Zealand, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

What is a franchise?

A franchise is a business model that you can use to grow your business. You (the franchisor) allow other parties (the franchisees) to replicate your business model to create their own success. In return, your brand grows, and you receive various fees or royalties.

What legal documents do I need to start a franchise?

There are various documents that you may need to start a franchise. For example, you will need a franchise agreement, a franchise disclosure agreement, and a franchise or operations manual.

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