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Why franchising matters to the New Zealand economy

The Franchising New Zealand 2021 Survey provides insight into the significant contribution that the franchise sector makes to the New Zealand economy.

The size of the sector

Franchising is ingrained in every economic activity in New Zealand. From dog washing, gardening, to cafes to home renovation and car dealerships, the reach and depth is immense.

There were 590 franchise brands operating in New Zealand in 2021. When you mention franchising many people still think of food and beverage, accommodation or retail.

These categories reduced slightly but we saw growth in construction, which brands represent 14.8 percent of franchise brands, administration and services (which now represent 12.8 percent of the total franchise brands.)

Contribution to GDP and Taxation

When you look at contribution to GDP you can see that franchising does really matter. Sales turnover for franchise sector was estimated at $36.8 billion or approximately 12 percent of New Zealand’s Gross Domestic Product.

Impressively this represented approximately $9.2 billion growth over the period of the previous survey (in 2017).

When you add motor vehicle sales of $13.7 billion, and fuel retail sales of $8 billion, sales for the entire franchising sector were estimated at $58.5 billion in 2021.

In spite of very difficult trading conditions the total sector saw an increase of approximately 26 percent.

All of these sales added to the government coffers via a variety of taxes including GST, company profits/income taxes, PAYE, ACC and other taxes.

Foreign earnings were also generated by the franchise sector, with just over 20 percent of franchisors reporting to have entered and be operating in international markets. Further benefits, though difficult to measure, are generated by flying the New Zealand flag abroad.

Franchising also provided direct returns to the community.

Of the franchise systems that participated in the survey, 90 percent reported that they were engaged directly in community activity or directly sponsored such. The average contribution to community activities was $30,000 per franchise brand.

Employment and training

Franchised businesses directly employ more than 156,820 people in New Zealand. This has increased 8,000 per year each year over the past four years.

Not only are franchise businesses employing significant numbers of people, franchises also make a significant contribution to increasing New Zealand’s economic productivity. In addition to training franchisees (whom own the individual business units), franchising is a huge training machine.

Median training hours for new employees was reported at 20 hours per annum and impressively, 17 percent of the responders (franchise brands) to the 2021 survey reported that employees receive 100 hours or more training in their first year.

Providing the ability for people to successfully be in business for themselves

The statistics that provide me with the most pleasure are those related to business ownership. There are an estimated 32,300 businesses operating under a franchise format.

The vast majority of franchises are small to medium enterprises, with an average start-up cost of around $150,000. Franchising is providing a significant number of Kiwi’s the ability and support to successfully pursue their entrepreneurial aspirations.

Data and statistics in this article are from the 2021 Franchising New Zealand Survey produced and endorsed by Massey University and produced in conjunction with the Franchise Association of New Zealand. Iridium Partners are proud supporters of the 2021 Franchising New Zealand Survey.

Related: Don’t be afraid to use The C Words

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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