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Franchise Survey Shows Continued Sector Growth

12 August 2001

The 2001 Franchising Association of New Zealand (FANZ) Survey of Franchising shows 16% growth per annum of franchise start-ups in New Zealand, with 768 new units opening in the 12 months prior to the survey. Overall respondents reported an impressive 20% increase in turnover from last year's survey.

An estimate of the total number of systems operating in New Zealand is 300 putting total estimated turnover at around $10 billion* and the number of people working in the franchise sector at around 70,000*, based on turnover and staffing averages gleaned in the 2001 survey.

Robert Fowler, Chairman of FANZ, says there were 111 respondents to the survey, which is conducted by Auckland University for the Franchise Association, and sponsored by the National Bank. KEY FACTS:

* The New Zealand franchise sector is estimated to account for total annual turnover of NZ$10 billion

* The number of people working in franchising totals approximately 70,000

* Turnover, number of outlets and those employed in them exhibit 15-25% growth pa

* Business & Property Services (up 18%), Construction & Trade sectors (up16%) and Personal & Other services (up 6%) are all experiencing growth. * 77% of franchise systems operating here originate in New Zealand

* the average failure rate of franchised units is less than 6% within 3 years.

* The median total start-up cost for a franchise is $125,000

Robert Fowler says Auckland once again proved to be the franchise capital of New Zealand with 33% of the franchise units in the survey based in Auckland. 51% of franchisors were located in Auckland, followed by Christchurch with 13%.

From the survey, 17% of the franchise units were located in provincial upper North Island, 12% in provincial lower North Island, Wellington (11%), Christchurch (10%), and 5% in Hamilton and 3% in Dunedin. A similar distribution was reported for company-owned units with Auckland having 38% and Christchurch 15%. These figures reflect the fact that company-owned units are most likely to be co-located with the owners or 'head office' of the system.

The 2001 survey attributed 37% of the franchise sector to 'retailing' (combining food, beverage, other retail and accommodation systems), with 'property & business services' 16%, 'construction and trade services' 14% and 'personal and other services are 7%.

The median start-up cost for New Zealand franchisees was recorded in the 2001 Survey at $125,000, ranging from $6 800 for a small business like a lawn mowing round to a multi million dollar start-up cost for a large retail franchise. The franchisor's initial investment is likely to be between $75,000 to $100,000 and the gross return to the franchisor less than $25,000 per unit per annum for over one-third of units and less than $100 000 for two-thirds. The failure rate for franchise units is less than 6% over a three-year period.

Only 16% did not consider that the franchise provided a good return on investment for the franchisor (and 6% for the franchisee), with 31% of respondents rating their system as Excellent and 46% as Above Average.

Robert Fowler says the survey confirms the upward trend for franchising in New Zealand, with growth in new systems, growth in turnover and growth in employment. "With these sorts of results it is easy to see why franchising has become such a world wide success story, and that is because people in franchising are reaping the rewards."

This is the fifth annual Survey of Franchising in New Zealand sponsored by the National Bank and conducted for the Franchise Association of New Zealand by senior information systems lecturer John Paynter from the University of Auckland.

The survey will provide newcomers with useful insights when they visit the Auckland Business Opportunities & Franchise Expo, which takes place at the Logan Campbell Centre in Green Lane 17-19 August, from 10 am until 5 pm daily.

* The 1999 Survey of Franchising estimated total turnover at $6.5 billion and those 'employed' at 45,000; in 2000 it was $6B and 40,000 respectively. At the time the lower 2000 figures were attributed to a higher proportion of start-up franchise systems responding to the 2000 survey, bringing the average turnover per system to a level that was slightly lower than last year. That this was an aberration is confirmed by this year's result.

ends


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