Survey shows resilience and optimism in franchise sector with $10.4b turnover growth

The survey, the eleventh of its kind, was conducted between 26 June and 6 September 2024 by Massey Business School (MBS).

The survey confirms there to be an estimated 546 business format franchisors in Aotearoa New Zealand, comprised of 27,295 units. Whilst the projected number of total units compared to 2021 is 9 per cent less, the sector shows signs of stabilising post COVID-19. Based on a revised population size, the latest figures suggest that despite challenges, the franchise landscape remains resilient and continues to support a significant number of businesses across the country.

MBS Pro Vice-Chancellor Professor Jonathan Elms, who co-authored the report, says the $10.4 billion increase in franchise turnover, which excludes sales from motor vehicle and fuel retail, highlights the sector’s resilience and its remarkable recovery from the pandemic.

“Despite the reduction in the number of identified franchise brands, the franchise model continues to demonstrate its reliance, with strong turnover figures over the same period, underscoring the sector’s adaptability and enduring strength.”

Report co-author Dr Simon Moore says there were several opportunities that survey respondents recognised for the sector.

“Responding franchises are generally more optimistic for their franchisees over the next 12 months compared to the past year, especially in terms of total sales, profitability and debt levels. The commitment to training and development presents a bright future for upskilling franchisees and staff, while intentions for innovation in product development signify a dynamic and forward-thinking sector.”

He adds that product diversification is also on the rise, which showcases the adaptability and resilience of franchise businesses.

Franchise Association Chief Executive Officer Robyn Pickerill says when asked about the greatest challenges that franchisors are facing, the challenges identified were similar to those across the wider small business sector.

“Rising labour, rent and operational costs are putting pressure on profitability, especially amid economic uncertainty, inflation and low consumer confidence. Regulatory and legal considerations, along with ongoing labour and recruitment challenges, continue to persist. Other factors include market saturation, competition from international e-commerce and some franchisees' reluctance to adopt digital tools.”

However, Mrs Pickerill says optimism still reigns and franchisors are embracing opportunities for expansion and growth and the sector is showcasing its adaptability and resilience.

Further key findings include:

• It is estimated that more than 114,300 people are employed directly in business format franchising
• New Zealand franchise businesses continue to demonstrate a strong commitment to their communities, with nearly 90 per cent of respondents contributing through financial donations, sponsorships and other means
• Modern technologies are becoming increasingly vital for New Zealand franchises, including AI technologies, with 72 per cent of respondents either already using or planning to implement them into their operations
• Training for franchisees and their employees continues to be a strong focus. All respondents said they provide initial franchisee training, with the median training days being 14 days
• Half of respondents have implemented diversity, equity and inclusivity policies for both employees and franchisees
• Auckland is the most common location for franchise support offices to be based.

The survey gathers up-to-date information on the practices, performance and trends within the New Zealand franchising sector, and identifies key opportunities and challenges faced by franchisors. It is part of an ongoing survey programme that contributes to a long-term understanding of the contribution and development of the franchise business model in New Zealand.

Survey sponsors include the Franchise Association of New Zealand, Westpac, Nexia New Zealand, Franchize Consultants, Stewart Germann Law Office, Iridium Partners, Laser Electrical and Plumbing, Exceed and Franchise New Zealand media.