New Zealand franchising takes Australia head on
A healthy dose of reality
I just returned from a very interesting conference organised by the Franchise Association of New Zealand (FANZ). While I have been going to these conferences for over 10 years this one in particular caught my imagination for two reasons.
Firstly the conference had more Australian input than usual so I was able to compare the Aussie presentations with those of our hosts. One could not help but be impressed with sessions by people such as David Campbell, Rob Melin and John O'Brien, which were engaging, down to earth and useful. As one participant commented, "We greatly appreciated the Australian sessions as they delivered a healthy dose of reality based on genuine experience and research."
Secondly I had a sense of deja vu as I observed the relationship dynamics between the Australian and New Zealand franchising cultures. Despite the New Zealanders having a healthy respect for our business experience, it would appear that their relationship with us in many ways parallels our relationship with the USA.
Arrogant and a little stupid
Whether we like it or not, Australia has been seen by the USA franchising sector over the past 20 years as a small, inexperienced and unsophisticated market. A country that is pleasant to visit and, perhaps a good location for a master franchisee or two, but not a market with any serious business knowledge to draw from. This attitude, by the way, has been changing in recent years.
On the other hand we Australians (please forgive the generalisation if you don't think this way) have had a perception of arrogant Americans patronising and perhaps even exploiting us with master franchise opportunities that are big in price, small in support and often out of touch with the realities of the local market. Perhaps we could even say that we see the Americans as having some great business experience but as also being rash or careless when they move outside their own market.
You probably see where I am going with this. Many Kiwis also see us in this way - arrogant and perhaps even a little stupid when our arrogance has led us to make misguided assumptions about their market. In some cases this arrogance has led several well-known Australian franchisors to have some quite spectacular and expensive failures.
A sophisticated, intelligent market
Despite its small size, I have found the New Zealand franchising sector to be run by sophisticated, intelligent business people, who are perhaps sharper than the average Aussie. They have to be to succeed in such a small market.
And despite our claim to have the most franchise systems per capita in the world, New Zealand in fact owns this title. With a population of four million people it has around 16,000 franchisees working from an estimated 350 franchise systems. And 70% of these have been developed locally.
Other indications of this market's sophistication is the quality of its local franchising magazine, the comprehensive assessment process used in Franchisor of the Year awards and the rigour of the FANZ membership screening process. Indeed some Australian franchisors have failed to initially make the cut and have had to go back to the drawing board to get their franchise agreements and systems in order.
Why some Australian franchisors have been fooled
The relatively large numbers of New Zealand franchise systems has led to a unique operating model where a typical franchisor team of maybe two or three people will support a franchise system with 10 to 30 franchisees. Not dissimilar to the State Master franchise structures we have seen in Australia. And this is where some Australian franchisors have been fooled because it is a mistake to think that you can run a master franchise in New Zealand the same way as you would in Australia.
I asked Simon Lord, a past Chairman of FANZ and the editor of Franchise New Zealand magazine for his views on the differences.
Simon explained that New Zealand is not an urban society the way that Australia is. While Australian cities are two to four million people, New Zealand is made up of a few small cities of maybe a million or less people and lots of small towns with around 25,000 people. The market is further fragmented in the cities. For instance Auckland is split into sub regions.
Simon also noted that while the distances between towns are not too great, the transport system is not well developed which makes it costly to get around. The implications are that local marketing strategies can be complicated and franchisee support costly.
He believes that, rather than trying to hit the whole country through the main cities, it is often better to establish a cluster of sites starting with one city and several surrounding towns. This makes it easier to take advantage of regional marketing where a region includes a city and surrounding towns.
Don't skimp on your research
The message for Australian franchisors is not to assume they can just appoint a master franchisee or Regional Manager to support the whole of New Zealand in the same way that they might support a State of Australia.
So if you are thinking of expanding into New Zealand, do not just regard it as an extension of your Australian operations. Local competitors can be stronger than you think and some of our retails concepts do not automatically translate to this market.
Also do not take a laid back approach or skimp on your research just because everything seems similar to Australia. Get to know the local consultants and bring a genuine attitude of learning rather than one of arrogance.
This article appears courtesy of Franchise Relationships Institute. 27.08.2007
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