MAKE YOUR MOVE, MAKE YOUR MARK

Supreme success: Gerry Schumacher and Steven Painter

What do you want from a franchise, and why? How and when are you going about getting it? We look at your expectations versus the reality of owning a business, with the help of experts and the nation’s most successful franchisees.

If you’re looking at buying a franchise, it’s important to know your primary motivations and to measure your success against the right goals. You’ll also need to share your reasons openly with the franchisor of your preferred business. Before granting you a franchise, the team that will be supporting you to succeed must agree that the business has the potential to deliver what you want and that your expectations of time input, effort and potential returns (financial and intangible) are aligned with what the franchise system needs and can offer.

For 2024 Westpac Supreme Franchisee of the Year award winner Steven Painter of Landmark Homes Taupō, success stemmed from an opportunity that simply presented itself at the right time. Hailing from a building background himself, Steven says taking the leap into franchising was a move he felt ready to make. After aligning with business partner Gerry Schumacher, he hasn’t looked back.

“I saw an opportunity there in the market,” he says. “So I moved off the tools and jumped ahead financially by joining the Landmark Homes franchise.”

He says he has learned a lot about franchising over the last 10 years.

“Being a builder by trade, there was the matter of understanding the nature of the beast. Once you are aware of the size, the capacity for growth and how a franchise operates, you learn how potentially successful and enjoyable it is.”

Winning this year’s Supreme award, Steven says was hugely rewarding and very humbling, “It’s one thing to think you have a good business, but it’s another thing altogether to be recognised across all industries and across the whole country,” he said.

Key drivers

According to the latest New Zealand Prospective Franchisee Research survey, conducted by Franchize Consultants Ltd and Franchise New Zealand media, your motivations for buying a franchise are likely to be primarily income driven, with the potential to build wealth your main reason for considering the move.

Lifestyle improvements like flexibility, life balance and satisfaction are important secondary motivations, along with ways to have greater control over your own life, such as wanting a career change, having more security and stability, and making employment or asset provisions for other family members.

Two years on from the last Prospective Franchisee research period, larger numbers of you are facing redundancy or cannot find the job that you want, which is prompting more people in younger age groups (25-44 years old) to seriously consider the move to buy a franchise.

Our research found that almost half of you would consider moving to another region to take up the right franchise opportunity and over two thirds of you are considering buying a franchise with someone else.

Going into business with a spouse, partner or friend can provide real advantages, when you bring additional skills and experience to the business, as Steven Painter found when he met business partner Gerry Schumacher. The award-winning Landmark Homes Taupō franchisee says, “It’s key to bring different skills to the partnership and be able to handle workplace conflicts and change without animosity. There must be trust in what each other does, and a shared vision for what you want your business to achieve.” The pair recently brought on another partner when they took on the Hawkes Bay franchise and Steven’s wife Ingrid also works in the administrative side of the business, making for an even bigger pool of complementary skills in the team.

Proven power

Our recent Prospective Franchisee research found that the majority of respondents looking at buying a franchise have people management and/or business ownership experience, which begs the question, why would you prefer a franchise to an independent business?

Having access to a proven business model is the main appeal, according to the research findings. Brand recognition, help throughout start-up and the safety of ongoing support are all key factors in this decision, too.

One of the least-recognised benefits of a franchise system can be its buying power, which was only ranked as significantly important by 6% of prospective franchisees recently surveyed. Some of New Zealand’s most well-known franchise brands, such as Kitchen Studio and Paper Plus, have developed out of cooperative buying groups.

Having an established name lends a business a huge helping hand from the get-go. As the most visible part of a franchise operation, if the franchisor has done their work well, a strong, respected brand gives the new franchisee peace of mind and a high likelihood of customer loyalty from the outset. Not only will consumers know the name and what it stands for, but there will be a battery of back-up material – website, leaflets, clothing, signage, advertisements, social media presence, vehicle designs and so on – all reinforcing your brand identity.

For Steven Painter, the benefit of having a high-profile premium brand like Landmark Homes behind him has had particular relevance over some of the tough years in the building sector. “In this business, pricing is hugely important, so having the assistance of first-class buyers has been a real bonus,” he says.

“Being part of the franchise means we have some size and grunt behind us, and very good relationships with suppliers too.” One of their key suppliers, Bunnings, was publicly thanked when Steven and the Landmark Homes Taupō team accepted their Home & Lifestyle Franchisee of the Year award at the 2024 Franchise Awards gala dinner, with a table of enthusiastic supporters from Bunnings erupting into huge cheers as the winners were announced.

The Landmark Homes franchise system also took home the prestigious Marketing Campaign of the Year award, and Steven says that his Taupō and Hawkes Bay franchises have benefitted enormously from the marketing strengths of their brand, “Given the resources and support that we are able to tap into, there are so many opportunities for growth.”

Of course, not every franchise brand has the pulling power of a multinational, and some newer franchises won’t be able to offer that big impact marketing at first. But those smaller, newer franchises tend to require less investment in their early days. As each new franchisee joins, the brand – and its buying power – become more valuable.

System support

Being provided with systems, training and support to help you learn, run and monitor your business are one of the golden gifts of franchises. Franchising, properly done, is a mutually beneficial agreement between franchisee and franchisor: the franchisor makes their income from the success of your business, so it’s in their interests to help you make the most of your territory.

What if you had a support person or team that checked up on your progress regularly, gave you feedback on how you were doing and provided plenty of fresh ideas for doing even better? It sounds like the ideal way to start up in business, right? It’s a level of support the independent businessperson could only dream of. And that’s exactly what many franchisors provide for their new franchisees. At its best, franchising is like having a dedicated mentor and business coach rolled into one – and so much more besides.

The franchisor/franchisee relationship starts with the selection process. It’s not in the franchisor’s interests to appoint anyone who they don’t think will succeed, so by being offered the franchise, you should be confident you possess the necessary qualities. The more rigorous the selection process, the better for you.

Equally important is the continuing support. A franchisor should have people experienced in every aspect of the business you run who can answer any questions on a day-to-day basis. In addition to this, they have a monitoring role, helping you to maximise your performance in such areas as production costs, sales, promotion, staff recruitment and so on, and providing additional training or advice as required. Field managers, who check in with you and visit your operation regularly will help you keep a watchful eye on how things are progressing. They are a valuable resource of support – so important that they are even recognised with their own category in the Westpac New Zealand Franchise Awards (see page 24).

Training

Training trends, according to Massey University’s 2024 Franchising New Zealand Survey released in October (see page 44), are moving towards shorter initial training periods, with 48% of franchises now offering 10 days or less of initial training, compared to 39% in 2021.

These changes could indicate efforts by franchisors to lower barriers to entry and streamline onboarding through the use of more efficient processes and technologies.

Our recent research shows that prospective franchisees are also placing less importance on ongoing training, but the reality is that operational franchisees will usually expect and benefit from assistance from franchise support teams when moving through periods of technological or market change.

Looking deeply into what a franchise’s training looks like; its content, how it is delivered, by whom, when and for how long, are considerations to put high up on your priority list when assessing potential franchises to purchase. Seeing evidence of a robust operational system and comprehensive training programme can clearly be powerful in attracting and reassuring potential franchisees.

Investment expectations, financial goals

What you expect to spend on a franchise business varies significantly, according to the latest Prospective Franchisee research, with 30% of respondents prepared to invest under $50,000 and 26% willing to invest between $100-$300k. And, once operational, 64% of prospective franchisees surveyed expect a positive income (combined profit and wages) in their first year, while 52% are anticipating earning at least $100,000 annually, once established.

The range of start-up costs expanded significantly in 2024, according to the Massey University-led Franchising New Zealand survey, with respondent franchises costing anywhere between $280 and $1.5million. The median total start-up cost for retail franchise respondents was $200,000, for non-retail it was $100,000.

Flexible entry options offer franchisees a choice of investment levels to suit their budget and risk appetite. Tiered investment models (eg. smallscale entry-level vs. full-scale operation) can provide different ways into the same franchise.

In terms of income, franchisees need to be mindful of having realistic expectations and, as such, ensure robust conversations take place in order to gauge these from the outset. Gaining access to transparent financial data, including average franchisee income across different investment levels, will provide a valuable barometer for realistic income projections. McDonald’s, for example, famously offers financial projections tailored to investment tiers, making it easier for prospective franchisees to visualise return on investment.

Decision-making due diligence

Most prospective franchisees say that they will consult multiple information sources, including accountants, lawyers, and existing franchisees when contemplating taking their first steps into franchising, or purchasing further franchise units. Membership of the Franchise Association of New Zealand (FANZ) is also felt to be a critical component of the mix – for credibility, best practice, networking and trust.

However, only just over half – 51% – of respondents said they would consult a lawyer for advice before purchasing a franchise. The reality is that disclosure documents and franchise agreements are lengthy and wordy legal documents. If your preferred franchise is a FANZ member, the FANZ Code of Practice and Ethics requires members to at least recommend, if not insist, that you have the franchise agreement explained to you by a lawyer experienced in franchising.

Partner with experts in franchising for a comprehensive assessment, advice and support in all aspects of legal, financial and accounting affairs. Franchise-friendly banks can provide a raft of financing options tailored to your specific need, factoring in your entire financial situation and with deep knowledge of a wide range of franchising systems and processes.

Breaking down barriers

As potential franchisees, you said your biggest reservations to taking the plunge are high initial costs, financing challenges, and uncertainty about income and return on investment. Franchisors might address these concerns proactively by offering flexible financing options, clear evidence of returns and testimonials from existing franchisees.

Include realistic income timelines in your considerations on choosing a franchise. Ask for case studies for both under-performing and high-performing franchisees to provide a balanced perspective. Find out about any accolades the system and its people have received. These can speak volumes and provide an independent assessment of the quality of the outfit and its team.

Franchises may offer a ‘behind-the-scenes’ look at their operations, such as shadowing an existing franchisee, taking part in live webinars or open days at existing outlets. Take every opportunity to engage and educate yourself and if the options to ‘try before you buy’ don’t seem to exist, just ask the franchisor.

On page 60 of this magazine you will find a handy list of 250 Questions to Ask Your Franchisor.

Of course, no franchise is a guaranteed success and as a potential franchisee you must always be cautious, but there is no doubt that – providing you choose well – buying a franchise can be a move marvellously worth making, as Steve well knows. “Know your primary motivations, measure your success against the right goals, build a strong team and you’ll likely go far.”