Some sectors have been doing it tough, some have never had it so good. Which franchises are looking forward to good times ahead – and what should buyers look for?
‘Staffing, inflation and supply chain problems are not really an issue for our owner/operator franchisees, other than that some of our costs are increasing. At this stage, we’re trying to hold our customer prices for as long as we can.’ Les admits that the automotive industry has faced a shortage of qualified mechanics and technicians for several years, which has now been exacerbated by Covid and new visa regulations. ‘Our focus has therefore been on guiding our franchisees to support the well-being of their staff and increase retention, with access to Employee Assistance Programmes; enhanced training; flexible working hours; travel assistance; performance bonuses; and financial support for apprentices.’
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he economists warned us that 2022 would be a challenging year, and they weren’t wrong. Although the pandemic has largely passed, the problems it left in its wake have multiplied, with inflation, supply chain issues and the added pressure of oil price rises created by Russia’s war on the Ukraine all coming together to create a new set of problems.
These are all areas in which the size and buying power of franchises can offer huge support to business owners, especially when starting up.
Only an idiot would think of starting a new business under these circumstances, right? Well, no. Many businesses have actually been doing pretty well, while in those industries badly affected by Covid, the only way is up – and that’s often the best time to start a new business. And while New Zealanders have traditionally been big investors in property, the slowing market, more stringent rental conditions, removal of tax deductibility for interest costs and higher interest rates mean that’s not looking so attractive right now. That’s why we’ve taken a look at a number of different sectors in franchising to see what opportunities they offer to those ready to take the plunge.
Building & construction Building has been through a massive growth period – as well as home building franchises, the home renovation, repair and enhancement sectors have also been doing well. But now all the talk is about the shortage of supplies, the increasing cost of goods and a potential fall in house prices. So should you believe the doom-mongers? Stuart Humphrey of Latitude Homes doesn’t think so.
And remember: when you buy a franchise, you can see how the business model performs before buying it. You’ll also get the training, support, systems and marketing you need to get yourself established, not to mention the buying power that comes with being part of a larger group. All these things add up to reduce risk and increase your chances of success.
The big picture Looking at the overall picture, the borders have opened again, although the tourists aren’t exactly flooding back yet. However, it’s winter, and we might expect more of that pent-up demand to be released over the Christmas/ summer period, as friends and whanau reconnect. While some New Zealanders will head overseas again to travel or work, we can also look forward to the return of international students and migrant workers, easing some of the labour shortages that have caused such disruption in many industries. And as people who have become disaffected or disconnected from their jobs look for something different in their lives, New Zealand offers many attractions. Sometimes, we have to read the overseas commentators to be reminded of that. That’s not to say everything is rosy but, as the saying goes, change creates opportunity. What opportunities might it have opened up for you? Here’s a guide to some of the main sectors within franchising, with comments from leading franchisors about what’s been happening and their current outlook for the next 6-12 months. Once you’ve read this, you’ll find lots of other advice in the following pages to help you.
Auto services Franchises available in this category divide into two: the fixed type, such as Pit Stop, where customers bring their vehicle to you, and the mobile type, such as Touch Up Guys, where the franchisee goes to the customer. Les Seiler, Pit Stop’s Franchise Divisional Manager, says that there are several good reasons the category is an attractive option for new business buyers right now. ‘With more cars on the road than ever, the market continues to grow. People are back in their cars following the Covid lockdowns, and are using them both for work and domestic travel. All these vehicles need servicing. ‘The cost of replacing a second-hand vehicle has increased by over 30 percent in the past two years. There are also delays in supplying new vehicles from overseas. This means people are retaining existing vehicles for longer, increasing the demand for servicing and repairs.’ Martin Smith of Touch Up Guys adds, ‘In times of high inflation and uncertainty, we pride ourselves on our business being effectively recession-resistant. Rather than buy a new car, customers tidy up their existing car instead. The market dynamics might change, but the demand is still there in one form or another.
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‘We think the market is just waiting for that natural self-correction to find its own equilibrium,’ he says. ‘The market is getting used to returning to 5-6 percent interest rates after the last few years of record low rates, but we believe it will bounce back more quickly than expected as demand is still strong. We believe the market will be in a far better place in 8-12 months’ time, and the advantages of the franchise are more relevant than ever: it’s a cash-positive business; we have solid relationships with key suppliers for best group bulk prices; and our franchisees enjoy preferential supply in the current market.’ Neil Hawker of Trident Homes agrees. ‘Joining a well-respected and recognised brand puts you firmly in the public arena from the get-go, and being a volume-based builder affords you many additional benefits from our major supply network. Loyalty pays dividends.’ And he adds another key benefit. ‘Becoming a member of our country-wide team of franchisees means you’re not alone during tough times and there’s plenty of support and guidance available.’
BOUNC Franchise New Zealand
Winter 2022
Year 31 Issue 02
