Should I franchise my business? 5 questions to ask before franchising in New Zealand

Should I franchise my business? 5 questions to ask before franchising in New Zealand

If you have ever wondered whether franchising could be the next step for your business, you are considering it in one of the world’s most established franchising markets.

New Zealand has one of the highest rates of franchising per capita globally, with franchising playing a significant role in business growth and employment across the country.

The 2024 Franchising New Zealand Survey, conducted by Massey University’s Business School on behalf of the Franchise Association of New Zealand (FANZ), in partnership with Nexia New Zealand, highlights the scale and strength of the sector:

• 73% of franchise networks are New Zealand founded
• Nearly 20% of New Zealand franchise networks have entered international markets
• Sales turnover for the New Zealand franchising sector was estimated at $73.4 billion in 2024

Is your business ready to franchise?

Franchising can be a powerful growth strategy for a business, but it isn’t suitable for every business or every stage of growth. Here are a few key questions to consider before you take the plunge:

1. Do you have a proven, profitable model?
   The foundation of any successful franchise system is a business that has already demonstrated it works consistently, and ideally across more than one location or format. Prospective franchisees are investing their savings and livelihoods in your model. They need to see a track record of solid financial performance, documented clearly and transparently.
2. Can your business model be successfully replicated?
   Can someone else operate your business to the same standard, without you being present every day? Your systems, processes and customer experience need to be documented in a way that is clear, teachable and repeatable. If you couldn’t write a step-by-step operations manual for your business today, that’s something to work on before franchising.
3. Do you have a strong, recognisable brand?
   Franchisees are buying into your brand as much as your systems. A strong market reputation, a distinctive identity and clear brand guidelines are essential for attracting quality franchisees.
4. Are you prepared to support others?
   Moving from business owner to franchisor is a significant shift in mindset. Your primary role becomes supporting and enabling your franchisees to succeed, rather than running day-to-day operations yourself. This includes providing initial training, ongoing field support, marketing assistance and access to your network.
5. Are you financially set up for the associated costs?
   Franchising your business will involve costs. You’ll need to invest in legal documentation (franchise agreements, disclosure documents), operations manuals, training programmes, and potentially a pilot franchise operation. Getting the financial architecture right from day one, including the fee structure, royalty model and benchmarking, is one of the most critical steps in the whole process. This is where an accountant with franchise-specific expertise can make a material difference.

Why specialist franchise advisors matter

Not all accounting and legal advisors are created equal and in franchising, the difference between a generalist and one with genuine franchise industry experience can be significant.

Structuring
Whether the franchisor is a company, trust or partnership, how IP is held and how royalties flow, has significant tax implications. Getting this right from the start avoids costly restructuring later.

Modelling fees
Setting your initial franchise fee, ongoing royalty rate and marketing levy at the right levels requires careful financial modelling. Too low, and your system isn’t sustainable; too high, and you’ll struggle to attract and retain good franchisees.

Financial benchmarking across the network
One of the great advantages of a franchise system is the ability to compare financial performance across franchisees. Working with a franchise specialist accountant means setting up reporting frameworks that make this possible, assisting in identifying high performers, and supporting those who need it.

Preparing for growth
Whether you’re looking to expand domestically, develop a master franchise model for international expansion, or bring in investors, sound financial planning and clear reporting are essential.

At a minimum, your advisory team should include:
– A Chartered Accountant with franchise-specific experience
– A franchise lawyer who can review or draft your franchise agreement and disclosure documents
– A franchise consultant who can advise on system design, documentation and franchisee recruitment

Franchising is not a shortcut to growth but when it’s the right fit, it can be a powerful way to scale your business, create jobs, and build lasting value.

If you’re considering franchising your business, obtaining specialist accounting and advisory support early can help you avoid costly mistakes and build a sustainable franchise system. The franchise team at Nexia New Zealand works with franchisors across a range of industries, helping them structure, grow and manage successful franchise networks.

To help answer common questions about franchising, we have included some FAQs below. If you have a question that’s not covered, please get in touch with us.