BREATHE Cover Story: Why Buy a Franchise?
Looking to escape the city and enjoy life in the country? Buying a franchise might offer you the way to freedom
Just a few of the franchisees in this issue who have created a new life for themselves in regions around New Zealand
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ew Zealanders used to be called ‘The world’s greatest travellers’, but we haven’t seen much of the rest of the world in the last year. The closed borders have had one benefit, though – between lockdowns, we’ve all seen a lot more of our own country, and it turns out we like it. The pandemic has also encouraged many people to re-evaluate their lives, spend more time with their families and talk about what’s important to them. With lockdown-prone Aucklanders in particular struck by a combination of constant roadworks, impossible traffic and high property prices, the appeal of spending time in another part of our beautiful country is obvious. And, after getting out and experiencing New Zealand outside the cities, a lot of people have been looking at making the move permanent. They’ve also been realising that moving to the regions can fulfil more than the dream of a better lifestyle – it can also be the start of changing your life in another way, by owning your own business. Leaving the city doesn’t mean ending your career – it means starting a new one.
costs. That’s why so many of the outlets on Queen Street are increasingly open all hours – they can’t afford not to be.
‘We have definitely seen an increase in Auckland purchasers looking for regional businesses in the last year,’ says Chris Small, managing director of ABC Business Sales. ‘At least 10 percent of current sales are being acquired by people living in a different region.’ And ABC’s Market Intelligence Report shows high percentage growth especially in Waikato/ Bay of Plenty and the South Island.
2. Although sales may be lower, so are staffing costs. Rent and staff are the two biggest costs for most businesses, which allows for lower fixed costs and greater profitability. Wages may be lower in the regions, although minimum wage rates are national, and there may be grants available to help people get off long-term unemployment and into paid jobs. All these factors add up.
A growing trend According to Philip Morrison of Franchise Accountants, ‘For a number of years now we have been seeing more and more clients looking to sell up property in Auckland and move further afield to start businesses. They see it as an opportunity to improve their financial position overnight, reduce debt and improve their quality of life, and if they want to have their own business then cashing in on their property can make it very affordable. ‘If they are concerned about leaving the Auckland property market altogether, then keeping their property and renting it out can be a good option. They can almost certainly rent something in the regional centres much more cheaply, so they are reducing the burden of debt that the new business needs to support. In turn, that enables them to pay off any borrowings and improve profitability more quickly.’
Big bucks or bright lights? Regional locations can hold another surprise for business buyers, too – they may not attract the bright lights, but they can bring in the big bucks. ‘In fact, some of the most profitable outlets in many franchise systems are located in the regions rather than the major centres,’ says Daniel Cloete, National Franchise Manager for Westpac. The key word here is ‘profitable’ rather than ‘highest sales’. Regional centres might have a smaller economy but they can produce better results. There are four main reasons for this: 1. Regional businesses often enjoy far better rent ratios than urban ones. The property market and rates in Auckland mean that many businesses need to have a significant level of sales before they even cover their
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3. In many sectors, there is less competition both from other franchised brands and from independents. While some independent operators may be excellent, most will be average and none will enjoy the buying and marketing power of a franchise, and the operational support that goes with it. 4. It’s also important to realise that because other costs such as housing are lower in most centres, franchisees don’t need to take as much out of the business to cover their everyday living costs. This means they can reduce debt faster and re-invest as required. All these benefits add up – and when you add in the double disadvantages of city property prices and all-day traffic jams, the appeal of regional businesses becomes obvious.
The franchise advantage Of course, all these factors apply to non-franchised businesses just as much as franchised ones, but franchises have additional advantages. For a start, no matter what the size of the business, you’ll still get the same level of training and support from the franchisor, because that’s what franchises do. Even if you have a small retail outlet in Whanganui, you’ll only be paying the same for your goods as an outlet five times the size in Sylvia Park, because that’s how franchises work – they pool their buying power. You’ll have more security of supply, too, and, while regional locations can mean higher freight charges, many franchises have good national deals in place to help reduce these. And you’ll have the benefits of combining a nationally-known brand with truly local ownership – something that creates an incredibly strong Franchise New Zealand
Spring 2021
Year 30 Issue 03
