To franchise or not franchise | Rotorua News | Local News in Rotorua

Buying into a franchise leaves a quarter of business owners disappointed, but local franchisees say it can be a great way into business ownership - if you do your homework, a new survey shows.

Research by Massey University shows a quarter of New Zealander franchisees say their experience of franchising did not live up to their expectations. But it also reveals that less than half of franchisees believed they conducted sufficient due diligence before committing themselves.

Rob Parry and his wife Linley Parry own the four stores in the McDonald's Rotorua franchise, which won Westpac Rotorua Business of the Year in 2010. "It is really important to find a franchise that fits well with your own values. You need to understand what the franchise values are and that, if they are different, you will have problems. You do need to do your homework."

Both the Parrys worked for McDonald's for 18 years before becoming franchise owners, so he said they knew exactly what they were getting into.

"McDonald's is not for everyone. If you are a free spirit who wants to do your own thing, it isn't the franchise for you. But we are very process-driven people and it has been very successful for us."

He appreciates the instant brand recognition and said an organisation the size of McDonald's had huge resources available to franchisees.

For such a large organisation, Parry said it had excellent communications and franchisees could join various committees to have a say on how the wider franchise operated. But it also offered scope for individual franchise owners to localise their businesses. "We are a local business. We live in the local community and that gives us a competitive advantage."

His advised anybody looking at buying into a franchise to talk to existing franchisees. "Franchisors will always paint a very rosy picture, but that might not always be the case."

Dana Symons and husband Mervyn Symons are the franchisees for Robert Harris in Tutanekai St, Hinemoa St and the airport. As a previous owner of independent cafe Indigo, she believes she is in a good position to compare franchise ownership and normal business ownership.

"We did our homework and visited the Tutanekai St store several times at different times of day. We did not know much about franchises at that point. We just saw it as a good business."

It was not until the very thorough vetting process started they realised it was not just about buying a cafe. But the value of the brand created through the thorough vetting was immediately apparent when they took over the cafe at the airport.

"Even the milkman noticed. Previously the people ordered three or four bottles of milk a day. We were straight away getting through two or three boxes. It made it very clear to me the value of a well-known brand."

But good brand recognition was not enough to be successful and Mrs Symons said many people seemed to think franchises would run themselves. "They don't understand it is still your business and you still have to work hard to make it work."

Opportunities to network with other franchisees were priceless - letting her know she was not the only one working through various issues and processes - and the national buying power provided financial benefits.

Adrienne Young, of Property In Depth, works in a different field, but also sees huge advantages to being part of a franchise. "Being a part of the franchise has enabled us to be ahead of the profession in terms of the technology we use, but also to ensure we are continuing to be able to procure work. Our franchisors work very hard at a head office level for banks and lending institutions to ensure they know who we are and what we do."

While joining a franchise had involved giving up some autonomy, the trade-off had been worthwhile.

"It's worth it because they take some of the major decisions and processes out of my hands, leaving me to just concentrate on my business at the real ground level."

Factors such as branding, creation of marketing material and decisions around professional indemnity insurance were taken care of, in line with industry standards.

She enjoyed the combination of being independent, but still part of a team.

"We are largely all in the same boat, so there is always someone, at whatever level you need, to talk to. The franchisors are fully involved and always available for business support."

Young recommends people do their research, ensuring franchise documents are fair around dispute resolution and restraint of trade and that royalties were fair and in line with industry standards.

"Run the numbers to ensure you can make a living. Consider the time frames for rights of renewal of the contract as well as termination. Look at additional fees that may be incurred along the way such as adding staff."

She too sees a shared vision as an essential component of a good franchise fit.

"We both see the potential of what we are doing and are prepared to chase it hard."