According to a (18 December) report by the The New Zealand Herald’s Ben Chapman-Smith, the lack of growth in New Zealand franchisors expanding overseas is a result of weak regulation on home soil. University franchise expert Gehan Gunasekara, who is the Auckland University associate professor in commercial law, believes the plateau has occurred because New Zealand has almost no regulation in the sector.
A recent report on the New Zealand franchise sector showed there were currently 446 franchisors operating, up only slightly from 423 in 2010. Massey University’s Franchising New Zealand 2012 found about 23 percent of those were currently franchising overseas – the same as in 2010.
Gunasekara is quoted as commenting, “I would argue the reason is that a franchisor has to reach a certain critical mass and develop a really good system at home before it can consider expanding overseas.”
Gunasekara added that if it was made tougher to set up a franchise system, people would have to “really do their homework”.
“We still have cowboys out there – there’s no real accountability,” Gunasekara told Chapman-Smith.
New Zealand does not regulate its franchise sector, unlike countries like Australia, but franchise owners can voluntarily join the Franchise Association of New Zealand(FANZ) and commit to its Code of Ethics.
According to its website, FANZ has some 200 members – including Burger Fuel, Cash Converters, Green Acres, Rodney Wayne, and Specsavers – which is less than half of the total franchisors operating in New Zealand.
“That’s a major threat,” Gunasekara said. “Everyone should be made to belong to FANZ or otherwise vetted in the same way.”
New Zealand urgently needs to implement tight regulation like Australia, he emphasised.