Seminar to explain conflicts and resolutions in New Zealand's $20 billion franchise sector

Following the recent high profile franchising dispute between Auckland fitness clubs Club Physical and Jolt Fitness, the Franchise Association of New Zealand (FANZ) and the Centre for Small and Medium-Sized Enterprises (SMEs) at Massey University are hosting a seminar that aims to provide a platform to discuss findings on franchising conflict and resolution.

Looking to explore ways that will develop and improve franchising practice, the seminar will also provide an opportunity to discuss analysis and recent benchmarking findings from the 2012 Franchising New Zealand Report on the importance of the franchise sector.

The Seminar, 'Conflict and Resolution in the Franchise Sector', is being held on Friday 17th May 2013 at Massey University's Albany Campus in Auckland.

Recently released research by Massey University's Dr Susan Flint-Hartle, which measured the contribution of the franchising sector to New Zealand's economy for the first time in nearly a decade, estimated that the sector has annual turnover of between $19.4 billion and $21 billion, and employs 101,800 people.

Franchising New Zealand 2012, a survey conducted by Massey University in collaboration with the Griffith Business School in Brisbane, found the sector has shown resilience during difficult economic times, but there is scope for the industry to innovate.

Dr Flint-Hartle says, on the whole, franchise businesses have been able to increase their levels of turnover, although there have been marginal decreases in size and profitability since the last survey in 2010, explaining "that is a reflection of the economy the effect of a very high dollar, rising commodity prices, and the ongoing impact of the global financial crisis and the Canterbury earthquakes.

"Franchise businesses are a microcosm of the SME sector as a whole, which has reduced by nearly 2% over the past two years. But around $20 billion in turnover is still a significant contribution to the New Zealand economy (and) franchising remains a very effective way of growing a business and offers many people a chance for supported self-employment so we cannot underestimate the role it plays."

While the past two years has seen a net growth in the number of franchise systems in New Zealand, there has been a marginal decrease in the number of franchisee units within those systems, especially in the retail sector. Over half of survey respondents reported increased sales, but a quarter also said their overall profit margins had declined.

Dr Flint-Hartle adds "it's an extremely competitive environment at the moment, and 60% of franchisors said they were forced to spend more on marketing to attract dwindling levels of business.

"Although 80% said their franchisees were operating profitably, that still leaves a significant number of strugglers."

Dr Flint-Hartle also identifies a number of areas where franchisors could develop their businesses, including better selection criteria for franchisee recruitment, moving into online sales, social media marketing, and sustainable business practices.

Here she states "franchisors are always complaining that their major issue is getting good people as franchisees, but they don't always appoint suitable people with at least some proven business skills and management experience.

"They choose people for their passion, or their integrity, which is understandable, but it doesn't always translate into running a business successfully. Franchisors bear some responsibility in this important area."

Dr Flint-Hartle also suggests that in many cases franchisees are chosen for their ability to conform, while franchisors could do well to encourage and provide opportunities for businesses and individuals to innovate.

"For example, only one-third of businesses sell product and services online, and the use of social media is not as developed and sophisticated as it could be it's ...

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