how buying a franchise can help you achieve your long-term goals W
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hat do you want out of life? Increased net worth, financial independence, a home of your own, a good education for your children? Do you want to be your own boss or contribute to your community somehow? These are the goals that help you create what you want in your life.
The important thing to remember is that these goals all require longterm thinking – you can’t achieve them overnight. And when you buy a franchise, it’s wise to apply that long-term approach, too. How many years are you prepared to put into a business of your own – and what do you want to get out of it? According to surveys, most franchisees in New Zealand stay with their chosen system for over 8 years – almost 20 percent stay more than 10 years. And there are many examples of franchisees like Mike Vickers, who has been with V.I.P. Home Services for 20 years already and has no intention of stopping (see page 33). That’s why, although it’s important to know how long your business will take to break even (pay its own way) and to generate personal income in the short term, it’s also important to consider your long-term prospects.
What goes around, comes around Over the course of, say, 10 years, any business is going to face challenges. The changing economic cycle will see periods of boom and bust, rising and falling employment levels, changing rates of inflation, and higher or lower interest rates. Experienced franchisors – and franchisees – will already have lived through one or more of these cycles. For the new business buyer, then, what is important is not so much where we are on the cycle right now, but how well their chosen franchise can perform over time. ‘If you look at the share market, shares go up and down in value constantly, but the underlying trend for good companies has historically been positive,’ points out Daniel Cloete, Westpac’s National Franchise Manager. ‘That’s why shares are best viewed as a long-term investment. If you apply a similar approach to buying a franchise, and choose something that not only suits you personally but is solid, profitable and sustainable over time, then you can do very well. ‘The normal business environment is one of ups and downs. If the business you are looking at can deliver positive results in the current tight market, then it’s a good sign. It means that when conditions ease, you’ll be well-placed to reap the benefits.’ The story of Jas Kaur and Mani Singh (see page 35) is one such example.
Advantages of franchises As Daniel says, one of the advantages of buying a franchise is that it’s a lot easier to find out about how the business really performs than if you buy or start up an independent business. ‘People might show you their pre-Covid figures, but the world has changed since then and what is important is how the business is performing now, and how it could perform in the future. ‘If you buy a franchise with an established company, you’ll be able to check the reputation of the brand and how it has fared during previous downturns, but you’ll have access to so much more information, too: information from across the whole network on rents, sales, wages, Gross Profit margins, and you’ll be able to compare your prospective figures to these to assess the long-term potential of your investment. ‘Talk to accountants who know the franchise, talk to other franchisees in the group, and don’t be afraid to talk about risk. Just as with buying shares – or property – starting any business does involve risk and you need to be comfortable with the level of risk you are taking on.’
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Franchise New Zealand
Autumn 2023
Year 32 Issue 01