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How Do I Buy a Franchise in NZ?

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Franchising is a popular way of starting a business in New Zealand. Buying a franchise is an attractive option for many entrepreneurs, as it offers a proven business model, brand recognition and ongoing support from the franchisor. However, purchasing a franchise can be a daunting process. This article will take you through six steps you need to take to buy a franchise in New Zealand.

1. Do Your Research

You need to do substantial research before looking for a franchise to buy. This means identifying the:

  • type of business you want to operate;
  • industry you want to work in; and
  • brands that interest you. 

You should also consider your budget, skills and experience, as these factors will influence your choice of franchise.

There are various resources available to help you research franchises in New Zealand. The Franchise Association of New Zealand (FANZ) is a good starting point, as it provides information on franchising in general. Additionally, the Association has a directory of its members. 

You can also:

  • search online for franchise opportunities;
  • attend franchise expos and seminars; or
  • speak to existing franchisees to develop an understanding of what it is like to operate a franchise.

2. Evaluate Franchise Opportunities

Once you have identified some franchises that interest you, you need to evaluate them to determine whether they fit your needs. This involves reviewing the following documents, if available:

  • franchisor’s financial statements;
  • revenue projections and business forecasts; and
  • the franchise agreement. 

You should also speak to the franchisor and existing franchisees to get a sense of the level of support and training provided. It is also valuable to speak to existing franchisees as you may learn of the other challenges they have faced.

When evaluating a franchise opportunity, it is important to consider the following factors:

  • Initial investment: This includes the franchise fee, equipment, inventory, and other startup costs;
  • Ongoing fees: This includes royalties, advertising fees, and other ongoing expenses you must pay the franchisor;
  • Territory: You need to understand the geographic boundaries of your franchise and any restrictions on your ability to expand;
  • Support and training: You should evaluate the level of support and training the franchisor provides, as this can make a big difference to your success; and
  • Brand recognition: The strength of the franchisor’s brand is an important factor in your success. The stronger the franchisor’s brand, the more likely you are to attract customers and generate revenue.  
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3. Secure Financing

Once you have identified a franchise opportunity you want to pursue, you need to secure financing to cover the initial investment and ongoing expenses. This will likely involve applying for a loan from a bank or other financial institution.

To secure financing, you must provide the lender with a detailed business plan outlining your projected revenue, expenses and profits. You must also provide information on your financial situation, including your assets and liabilities. 

Working with a financial advisor or accountant is a good idea to ensure that your business plan is sound. Further, your trusted financial confidant will inform you if your franchise has a realistic chance of success.

4. Sign the Franchise Agreement

Once you have secured financing and completed your due diligence, you are ready to sign the franchise agreement. This legally binding document sets out the terms and conditions of your relationship with the franchisor. The franchise agreement will cover important provisions such as the:

  • initial investment;
  • ongoing fees; 
  • territory; and 
  • intellectual property rights.

Before signing the franchise agreement, you should review it carefully and seek legal advice if necessary. You should also negotiate the terms of the agreement with the franchisor if you feel that any of the provisions are unfair or unreasonable.

5. Attend Training and Launch Your Business 

You must attend training provided by the franchisor after you have signed the franchise agreement. This may involve online courses, classroom training or on-the-job training. The purpose of training is to ensure that you understand how to operate the franchise. Also, you should attend the training to ensure you are equipped with the knowledge and skills you need to succeed. This training should continue throughout the franchise term.

Once you have completed training, you can launch your business. This will involve:

  • setting up your store or office;
  • hiring staff; and
  • implementing the franchisor’s marketing and operational strategies. 

You will need to work closely with the franchisor during the launch phase to ensure that everything runs smoothly and that you are able to build a strong customer base.

6. Maintain Ongoing Communication With the Franchisor 

One of the key benefits of franchising is that you have ongoing support from the franchisor. This includes access to marketing materials, operational advice and training. Therefore, it is important to maintain ongoing communication with the franchisor. You should maintain ongoing communication with your franchisor to ensure that you are taking advantage of all the available resources.

Additionally, you should also stay updated regarding any changes to the franchisor’s policies or procedures. This may involve attending regular meetings or training sessions. Alternatively, this may simply require you to stay in touch with your franchisor via email or phone. By maintaining a strong relationship with the franchisor, you can ensure that you are maximising the potential of your franchise. 

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Franchisor Toolkit New Zealand

This publication provides you with the fundamentals for franchising your New Zealand business, including set up, branding and management.

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Key Takeaways

Buying a franchise in New Zealand can be a great way to start your own business. However, purchasing a franchise can be a daunting process. Some key steps to purchasing a franchise in New Zealand include:

  • doing your research;
  • evaluating franchise opportunities;
  • securing financing;
  • signing the franchise agreement;
  • attending training and launching your business; and
  • maintaining ongoing communication with the franchisor.

If you need help evaluating a franchise opportunity in New Zealand, contact our experienced franchise lawyers 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.  

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Emily Young

Emily Young

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