What is Franchising?

Franchising is a method of marketing and distribution where a company (called the franchisor) expands nationally or internationally by granting a person or company (called the franchisee) the right to operate a copy of its business in another geographic area. The right will usually include the ability to use the brand name, the business system and the know-how of the franchisor.

The franchisor gains its income from initial and ongoing fees paid by the franchisee. In return, it must provide a variety of services to encourage the continuing profitability and growth of the franchisee’s business.

Franchisees invest in setting up the business in their own areas and are the owners of their own businesses. They receive their income from successfully marketing their products or services under the brand name of their franchisor.

Is Franchising Reputable?

Franchising has proved to be one of the most dynamic business methods of the past 50 years. It enables companies that have a desirable product or service to expand faster because they are using the capital, local knowledge and commitment of individuals who are in business for themselves.
It gives those who wish to be self-employed the ability to go into business properly trained and equipped, with the security of a well-proven product and system behind them.

Franchising is a reputable part of daily life in New Zealand. Many of our best-known brands are actually franchises: NZ Post, Lotto, Bakers Delight, Robert Harris, Cash Converters, Paper Plus, The $2 Shop and, of course, McDonald’s. Franchising should not be confused with ‘pyramid selling’ or network marketing.

How Big Is Franchising?

Based on the 2003 Survey of Franchising organised by the Franchise Association, the sector is currently worth over $14 billion and represents between 8% and 10% of New Zealand's Gross Domestic Product. There are over 350 franchise systems in New Zealand (74% of them home-grown), and over 14,000 operating units. Franchising employs over 100,000 people.