Covid’s ongoing impact on franchising

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Without question, Auckland’s continued lockdown is most acutely felt in Auckland, but if we use the old butterfly analogy, businesses based in the regions – whilst up and running – are affected to some extent.

This may vary depending on their reliance on travel or tourism, whether they require stock or services, originated in or through Auckland, or if their markets are in Auckland. Clearly we have an economy that is running in different gears.

These impacts and influences are not unique to any particular business model, but there are some additional factors from the ongoing lockdown that specifically affect franchised businesses.

Uncertainty creating paralyses

The greatest difference I have seen during this Auckland level 3 lockdown and previously is the influence on business confidence.

During previous lockdowns, we noted potential franchise business purchasers either holding off on purchasing decisions or not proceeding. This behaviour based on apprehension has resurfaced and is definitely stronger amongst investor and potential franchisees, across the country. More people are deferring decisions.

What is very different this time around is a universal inability to plan and execute business plans.

Franchisees and franchisors alike are feeling less confident around what the future holds and unable to make decisions and or execute business plans.

The implications of the country being in different levels is also being felt as Auckland based franchisors are unable to travel. The lack of clarity and lack of plan has created a continuing holding pattern for many.

Franchisees and franchisors alike are feeling less confident around what the future holds and unable to make decisions and or execute business plans. 

Additionally, and extremely frustrating for franchisees and franchisors alike, is the lack of control or ability to solve issues themselves.

Franchisors usually operate within a framework where they have the answers for their franchisee’s problems based on tested experience and processes. Currently they don’t have solutions for franchisees not being able to trade, and many of the implications derived from that situation.

Regional movement to intensify

My enthusiasm for the franchise business model and its application to regional New Zealand is extremely well documented and I have written on it on several occasions. Lower housing prices, lower rentals, less competition combined with the opportunity to achieve a desirable lifestyle contribute to the attractiveness and success rate of many regional franchised businesses.

There is plenty to indicate that regions are doing well and I fully expect that when people can exit Auckland, the numbers doing so will increase. As discussed previously, many will need to find business opportunities in the regions and will look towards franchising as a safer option.

International brands expansion into New Zealand

The entry into New Zealand and growth of international franchised brands and system is one area that remains difficult to predict.

Six months ago, New Zealand was perceived internationally as a safe place and open for business. We have been working with a number of international brands to enter or expand into the New Zealand market and there has certainly been a desire to do business here.

But as other countries open up their economies and New Zealand stalls, that’s perhaps not the current view.

Additionally, restrictions on travel into the country seriously retard international business access.

At the same time as many businesses and business models including franchising are not without challenges, past experience and the bounce back from 2020s’ lockdowns have demonstrated that the systemised approach to business, fast track start-up and ramp-up models of franchising will see continued growth in this sector.

Read: The world has changed, again

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Nathan Bonney
Nathan Bonney
Director of Iridium Partners. He can be reached at nathan@iridium.net.nz or 0275-393-022

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