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There are many factors that contribute to a successful franchise. You need to have a successful pilot operation, proper contracts and legal protections, as well as suitable locations for growth. However, what these look like can vary by industry and the nature of your franchise. Therefore, this article will go through five considerations for starting a liquor franchise in New Zealand.

1. Drafting Appropriate Documents

One key consideration for setting up a franchise is preparing robust and fair documentation detailing the contractual relationship between you and your franchisees. One such document is your franchise agreement. For instance, this legal contract sets out critical aspects of your relationship with a franchisee, such as:

  • the length of time that they will be a franchisee;
  • your obligations as a franchisor;
  • their obligations as a franchisee; and
  • dispute resolution schemes.

While there are no laws specific to franchising in New Zealand, general trading and industry-specific legislation will still apply to you.

For instance, the Privacy Act will apply to any personal information that you handle, whether that be your customers’ information or your franchisees’ information.

For your liquor franchise, this will include laws that specifically apply to alcohol. Therefore, you need to put in place appropriate policies and measures to ensure your franchisees abide by these laws and do not put your liquor franchise at risk. For example, if your franchisees breach any of this legislation, not only would you face significant reputational damage, but you could also face devastating legal consequences.

2. Liquor Licensing

Legally, all sellers and suppliers of alcohol must have a valid liquor licence. There are four kinds of liquor licences, which the table below sets out.

Licence Type

Application

On-Licence

For the sale/supply of alcohol for customers to consume on-premise, suitable for bars or restaurants.

Off-Licence

For the sale/supply of alcohol for customers to consume off-site, suitable for liquor stores or supermarkets.

Club Licence

For the sale/supply of alcohol to club members and their guests, suitable for sports or working clubs.

Special Licence

For the one-off sale/supply of alcohol to attendees at a special event, like a wedding or festival.

If you wish to start a bottle store franchise, then each of your franchisees must have a valid liquor licence for their business. They will need to apply to their local council for this, and meet the local requirements.

You will likely need to support your franchisees in this process. For instance, you should provide appropriate training/education for staff members selling alcohol on site. Having well-trained staff will likely factor into whether your franchisee’s local district licensing committee (DLC) approves their licence.

3. Appropriate Locations

As a franchisor, you need to find appropriate locations for your franchisees to run their business. Part of this process will include location scouting and conducting adequate research to determine the viability of your franchise in a particular place. For a liquor franchise, there are extra precautions you need to consider as a part of this process.

Accordingly, some councils and their DLCs have their own local alcohol policy, which can vary by area. Some examples of these policies include:

  • limiting the location of licensed alcohol suppliers in some areas;
  • restricting or extending trading hours; and
  • imposing a one-way door rule, where customers can exit but not enter premises during certain times.

For example, a DLC likely will not approve of a bottle store near a school or where its placement could harm the local community. If there are already numerous bottle stores in a particular area, they may be unlikely to grant a licence to a new one.

Therefore, you need to factor local alcohol licensing laws into your location scouting for your franchisees.

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4. Alcohol Advertising Regulations

In New Zealand, the advertising of alcohol is highly regulated. For example, it is an offence to:

  • encourage the excessive consumption of alcohol anywhere;
  • promote or advertise discounts on alcohol of 25% or more from anywhere that customers can see outside of your licensed premises;
  • promote or advertise free alcohol;
  • offer goods, services, or prizes as a condition of purchasing alcohol outside of your licensed premises; or
  • promote alcohol in a way that is aimed at or likely to appeal to minors.

One of your roles as a franchisor is to determine your franchise’s branding and marketing strategies. Accordingly, you need to be extremely careful about advertising your goods or services with a liquor franchise. 

5. Look for Franchisees You Can Trust

As the above paragraphs detail, there are strict laws regulating the liquor industry in New Zealand. For example, as a franchisor, you pass off a lot of control to your franchisees, who become the face of your business. Therefore, you need to find franchisees that you can trust to comply with both the law and any in-house policies you set.

Key Takeaways

If you plan your franchising strategy appropriately, you can start a successful liquor franchise. However, the sale and supply of alcohol are highly regulated in New Zealand, so you need to ensure you implement measures to comply with the law across your franchise.

If you need help with starting your liquor franchise, our experienced franchising 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 system that is made up of multiple commercial operations in different locations. Franchisees manage the day to day running of their particular operation. Then, the franchisor manages the whole system.

What is a liquor licence?

A liquor licence is an official certification saying that you can legally sell or supply alcohol. For instance, there are four different kinds, which correspond to how you supply alcohol and where your customers consume it.

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

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