David Foster is chairman of the Franchise Association of New Zealand
We read with great interest the comments by the Building Service Contractors New Zealand president, Patrick Lee-lo, in his article, ‘The dangers of franchised cleaning contracts’ (INCLEAN November/December 2012). They warrant a reply.
The Franchise Association of New Zealand (FANZ) welcomes informed debate on franchising, but finds Lee-Lo’s research, summation and then criticism of the franchising sector disappointing. His article will surely raise questions amongst franchising companies that are members of the BSC.
Franchising is a respectable and highly successful business format, both internationally and here in NZ. Good franchising companies are in the business of establishing, training and supporting their franchisees in running profitable businesses.
There is another very important element in the relationship with franchisors and franchisees – both have ‘skin in the game’. Managed well, both parties recognise that they are in business together and both prosper if the other prospers. Long-term success requires the relationship certainly not be a one-way street.
The FANZ website holds a wealth of information, including the fact that, in 2012, there were approximately 446 business format franchisors inNew Zealand. It is estimated that franchise businesses contribute between $19.4 billion and $21 billion to the country’s economy, with 88 percent Kiwi born enterprises, and provide employment for more than 100,000 people.
The BSC president’s criticism that the franchising industry is currently ‘unregulated’ and that the BSC believes the Government should regulate the industry requires that we respond.
In 2009 the Government conducted an extensive review of the regulations surrounding franchising and found that, “the mix of general business law and self regulation by the industry was appropriate”. In fact, then Commerce Minister Simon Power said, “New Zealand’s franchise regulations are robust and adequate.”
Our membership includes leading franchising companies within the cleaning sector that as members of FANZ comply with the Franchising Code of Practice, which provides additional controls on the way they recruit and resolve disputes with their franchisees.. Good franchise systems also provide a high quality of compliance through the provision of quality training, system manuals and audits.
Lee-Lo’s criticism that “franchisors focus on selling franchises and not necessarily on providing the best service” is at odds with our experience of the way members of FANZ operate. Franchising as a sector is experiencing continued growth, as it develops further within existing and new sectors – typically resulting in innovative and improved customer experiences.
If there is anything that we agree with Lee-Lo, it is that organisations should ask questions about the companies they engage or contract with. However, while he comments that franchisors are in the business of selling franchises, the actual work is being done by the franchisee, who as the owner of the business, is clearly focussed on maintaining the contract through providing good service.
We’re pleased that the NZ Government has recently announced new procurement policy ‘Government Procurement – Buying Goods and Services – the Five Principles’. Principle 2 ‘Be Fair to All Suppliers’ specifically outlines the Government’s intention to see procurement opportunities that treats all suppliers equally and doesn’t discriminate. Fundamentally, this now gives NZ suppliers a full and fair opportunity to compete for government contracts.
We look forward to operators within cleaning and other sectors being able to compete on an even footing.