The annual turnover of New Zealand’s franchising sector has grown by approximately 67 per cent in the past five years to $46.1 billion, according to the latest Franchising New Zealand report.
Robyn Pickerill, Franchise Association chief executive, said the sector is performing strongly and she attributes much of the growth to New Zealand’s political stability and strong economic performance.
“It is encouraging to see such large growth in franchising with an increase of around 185 new brands entering the market since the last report in 2012,” she said. “Many existing brands have also experienced considerable internal expansion.”
Report author Dr Susan Flint-Hartle says the past five years have seen the number of franchise brands grow from 446 to 631, and 72 per cent of these brands are homegrown. The survey, which was conducted by Massey University in collaboration with the Griffith Business School and sponsored by the Franchise Association of New Zealand, estimates there is now 37,000 business format franchises operating in New Zealand, employing more than 124,000 people.
The sector’s most significant growth has come in the broad retail sector that encompasses food and non-food retail, as well as accommodation services. Franchising has also grown in the construction industry.
“Growth in the construction sector isn’t surprising given the high demand in the property market nationwide, but particularly in Canterbury, Central Otago and Auckland over the past five years,” Flint-Hartle said. “And a strong tourism industry may underpin the growth in accommodation and food services.”
Record immigration inflows have also boosted growth. Over half the survey respondents reported significant migrant franchisee ownership, with the most common countries of origin being China, India, South Africa and the United Kingdom.
“New migrants arrive in New Zealand with equity and they want to use it to create an income. Franchise businesses offer them a lower risk path into owning their own business because all the systems are already in place,” Flint-Hartle said.
The sector also has growing Māori participation. “Sixty-seven per cent of our sample reported they had Māori-owned units in their franchise system, but Māori owners only account for five per cent of all franchise units,” Flint-Hartle said. “There is opportunity to increase the level of Māori participation, especially for those looking for a structured way of entering self-employment.”
Online selling in the franchise sector has grown considerably since 2012, with 60 per cent of franchise brands now engaged in online sales. The use of social media has also increased, although only 60 per cent of franchisors actively encouraged the use of a Facebook page by their franchisees.
“I think the sector is starting to embrace new trends, they are adapting to the online sales environment and using social media for customer and business-to-business communication,” Flint-Hartle said.
The research also found that, per capita, New Zealand is the most franchised country in the world after a survey identified 631 franchised brands operating in New Zealand and 37,000 franchise units – equating to one for every 124 Kiwis.
Professor Lorelle Frazer, director of the Asia-Pacific Centre for Franchising Excellence, said the New Zealand per capita rate is more than double the equivalent figure in Australia of one franchise unit per 310 people.
It is thought that no other country in the world comes close to the New Zealand rate of franchises per capita, giving it claim to the title of the ‘most franchised country in the world’.
Professor Frazer said it is also significant that 72 per cent of the franchises operating in New Zealand are home-grown brands.
