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Thursday, October 1, 2020
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Use the force for good

As in Star Wars, we are surrounded every day by the force – in this case, the force of franchising.

Franchising is an impressive contributor to the New Zealand economy: 631 systems, 37,000 individual business units employing more than 124,000 people.

Growth of the sector over the past five years is equally impressive, with total sector turnover growing from $30.8 billion to an estimated $46.1 billion.*

But why is the force of franchising so strong and why should we consider it a force of good? Let’s look at it through three distinct lenses, as consumers, investors and from a social perspective.

As a consumer, it is hard to think about an area of life that does not directly or indirectly involve franchising, from food to petrol, housing construction and real estate, even our mail delivery.

Franchising is usually associated with brands, which as consumers we love.

They provide an unwritten contract to meet our expectations, making for easier purchasing decisions, and in many instances providing us with better, less expensive and more consistent products and services.

These are, I would argue, all good things.

On an individual business unit level, franchising extends beyond the local branded café, or burgers to all sorts and sizes of businesses.

Compared with standalone businesses, franchises have a lower failure rate, often reach the breakeven point faster and benefit from a pool of experience.

The cliché of being in business for yourself, but not by yourself, holds true.

Moreover, franchising benefits a spectrum of investors across a broad range.

Large or small, investors know what the business is going to look like. Landlords know the individual local owner has skin in the game and will be supported and have the best chance of success.

And, if the unfortunate were to occur, often a franchisor will step in to operate the business, continue employment and pay the rent.

Banks may look more favourably on a franchise versus a stand-alone business.

It provides for more accurate business planning, and the banks are able to compare, benchmark and measure against other units.

Last but not least, franchising is a significant force of social good.

Contributing directly by generating employment, leading to growing strong economies, creating and supporting vibrant communities.

The statistics are evident.

Often under-acknowledged is the social contribution franchising makes via giving back to their communities to causes including children’s welfare, medical research, and social services.

That can extend to local and school sporting sponsorship, in many cases supporting activities that otherwise would not be possible.

The indirect and unmeasured contributions are huge. Just look at the pride of a young player of the day enjoying their prize.

So, the next time you buy a burger, have your grass cut by someone with that branded van, deal with someone you know that owns, is employed or supplies a franchise business – or even attend a local rugby game – you should be able to feel that you are contributing to the force of good created by franchising.

*All statistics in this article are quoted from The Franchising New Zealand 2017 Survey.

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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