Getting In Business
Buying a franchise is an option for
many immigrants to New Zealand, and interest is higher than ever.
Simon Lord, Editor of Franchise New
Zealand, looks closely at the issues and provides us with ten franchise tips for migrants.
Please Note: When this article was written, it was possible to obtain a Long Term Business Visa by buying a suitable franchise in New Zealand. Changes to immigration regulations require LTBV applicants now to have a minimum of two years of experience relevant to the franchise they wish to purchase in New Zealand.
Source of Growth
'There is certainly considerable interest in franchising among
potential migrants,' reports franchise consultant Selwyn Bradley. 'We
regularly get people referred to us by immigration consultants, but we're
also getting emails every month from people overseas who have seen
Franchise New Zealand magazine. A lot of enquiries come from South Africa.
They want to know what franchises are operating in New Zealand, what
opportunities exist, what are the criteria for finance, and so on. Several
are already involved with franchising in their own country.'
While some immigrants arrive with few assets, many newcomers are
cash-rich after selling up in their homeland. Some have business skills
and experience, others are looking for opportunities. All need help,
advice and familiarisation with the culture of their new country. These
are all aspects which should make franchising very appealing. Franchisors
who wish to reach and understand this market, however, need first to
understand the issues involved.
Jamie Smith of NZ Business Planners said, 'In many ways, buying a
franchise is an ideal option for an immigrant. They often have the money
to buy - our average client would have maybe $400,000 to invest - but they
don't know the market or have the contacts to start their own business
from scratch. They can supply the capital, the enthusiasm and the business
skills, and the franchise offers them a business, a name, an operating
system, and the necessary training and coaching.
'It also offers a reasonable level of certainty, which is important. At
the end of the three years, the Immigration Service intends to evaluate
business performance and compare the figures to industry norms. If the
figures don't stack up, the visa is unlikely to be renewed.'
Sales and Re-Sales
Selwyn Bradley sees immigration as offering two major opportunities for
franchisors. The first is the direct sale of new franchises, enabling
franchise systems to grow rapidly in the normal fashion. 'The other key
area is resales,' says Selwyn. 'When a new family comes to New Zealand,
they have to find a home, schools, settle into a new environment and a new
way of life. If they're contemplating a new business venture on top of
that, they're quite likely to prefer to go into an existing business which
offers more certainty and less stress than a new start-up. These people
are a ready market for existing franchisees ready to sell, and franchisors
should be offering a match-making service. The newcomers are cash-rich,
keen to work, and often used to success.'
While he agrees that the Long Term Business Visa/Permit scheme is a
good one, Selwyn points out that the amount of time it used to take to get
a decision out of the Immigration Service has been a problem. 'Because it
was new and they were so busy, it was taking up to six months to get a
decision. But if a potential immigrant is looking at buying an existing
business, six months is too long to wait. Something on the market now
would have been sold by the time approval came through.
'I've noticed the Immigration Service has speeded up.'
Selwyn also comments that the better-known the brand, the more likely it
is to be recognised by the Service. 'They check into things pretty
thoroughly - the better the brand the less likely the chance of it falling
over. That must have an impact.'
Not An Easy Route
Although buying a franchise offers newcomers many advantages, Gerald
Delany warns that it is not going to suit everyone and certainly shouldn't
be marketed as the easy way to a New Zealand visa. As a business
facilitator with Auckland New Ventures Inc (formerly the New Venture
Trust), Gerald has advised and trained many immigrants in the basics of
doing business in New Zealand.
'Immigrants certainly form a large pool of potential franchisees, and
many are very successful,' he says. 'But franchisors have to understand
that the market is segmented, and each segment may have different issues
which they will need to address.
'For example, people like Parvao Dropulich are intelligent and well
educated. They may have a lack of business skills and initial language
difficulties, but they are keen to succeed and can be really successful as franchisees. As they become more experienced and more confident, they may
contribute more and more to the system or they may simply graduate from it and move on to the next level of investment.
'But a lot of immigrants come from countries where there is basically
no experience of franchising and no understanding of the way it operates.
For example, I sent my entire class along to the Auckland Expo, and many
looked at the offerings and asked 'why should we pay $25,000 for being
involved in a business we can do ourselves?' They think they are just
being asked to pay for a name, not a whole business system – and a lot of
franchisors are so close to their offerings they forget to explain this
adequately.
'In addition, people from, say, mainland China or Taiwan are often
looking for an investment opportunity and simply don't see a franchise as
providing enough return for them. New Zealand is actually quite a low
profit economy, and our acceptable standards of return are far lower than
in many countries, especially when you add in franchise fees. They don't
recognise the value of reduced risk - in a lot of countries, if you have a
shop or a business of some sort you can pretty much expect to get by.
That's why a lot of immigrants buy independent businesses, especially in
the food business.
'Unfortunately, it's also why a lot of them come unstuck,' comments
Gerald. 'One of the things I tell my classes is to look at the population.
In Japan, there are 125 million people. If you open a noodle shop in
Tokyo, you can expect enough people to fall through the door to pay the
bills. But here, in a country of about the same size, we have 3.8 million
people. It makes a difference. To survive you have to have training, the
right structures, good business skills and be good at marketing to a New
Zealand audience.'
Different Expectations
Another issue which comes up is that immigrants often make the
assumption that doing business here is the same as doing business in their
own country. 'If you come from an area where a deal is done on a
handshake, a franchise agreement is a formidable document, especially if
your English isn't so hot,' says Gerald. 'On the other hand, if lack of
trust is an issue in your own country, the franchisor/franchisee
relationship - which depends on a lot of mutual trust - is pretty
disturbing. And attitudinal differences can be key. A lot of South
Africans, for example, are used to working on an independent model rather
than a consensual one, and a franchise relationship demands a bit of both.
That can make life interesting.' As an example of how fundamental some of
the differences are, Gerald explains that he teaches migrants 'how to do
the standard NZ business handshake. In some cultures, men and women don't
shake hands with each other at all, but here everyone in business does –
usually fairly briefly. In the middle east, a business handshake is a much
longer affair which New Zealanders would feel uncomfortable with.'
A more serious difference comes when alien concepts, such as leases,
are involved. 'One gentleman bought a (non-franchised) food business in
central Auckland just assuming that the lease continued. A few weeks later
he got a letter from the landlord saying the rent had doubled – the
previous owner hadn't mentioned that to him. The business just couldn't
operate with the new rent, and he ended up walking away from a $50,000
investment.'
And one other potential problem which he identifies is that of
unrealistic expectations on the part of new franchisees. 'Some people
expect everything to be done for them by the franchisor, which isn't the
way that franchising works. The British are particularly prone to this -
some take the attitude "Head Office should fix this" rather than "How will
I fix this?" laughs Gerald, who himself migrated from England in 1984.
'And people from the former communist bloc can have the expectation "If it
isn't being done it isn't allowed". But you don't buy a franchise and then
wait for instructions. You have to learn that if you want something to
happen, you have to do it yourself.
'It can be a serious problem. If a franchisor advertises "We provide
full marketing support," a potential franchisee might think that they
really don't need to worry too much about sales skills. They believe that
advertising will do it all. But even if the franchisor does all the
marketing of the brand you still have to get out there and visit clients
or handle the people visiting you. That can be a different matter –
especially if you are not too confident of your English.'
Helping Migrants Into Franchising
While attitudinal and cultural differences can create problems for
unwary franchisors, those who take the trouble to explore, understand and
adjust their approach to immigrants will find it worthwhile.
Research suggests that potential franchisees from among the migrant
communities have one of three goals:
- Building or buying themselves a secure job
- Returning a profit upon investment
- Providing a means of establishing themselves in New Zealand
'If you are a franchisor, you need to determine which sector of the
market your franchise is most appropriate for, where and how you are going
to reach those people,' says Gerald Delany.
'Immigrant communities tend to be quite strong - for example, there are
probably 6,000 Russians in Auckland alone. That means word of mouth is
very valuable. If, like VIP, you have happy Croatian franchisees, they
will tell the community and attract other franchisees.'
But he warns that franchisors must be prepared to put time and effort
into the process. 'Appealing to migrant communities requires the same care
as exporting to another country - perhaps more so because you don't expect
the differences. First, learn a bit about the market, the country, the
people and their business culture and expectations. Offer assistance and
build up relationships. Understand that in many cultures, the relationship
comes first and the business second; in such cases, the hard sell
approach will be totally counter-productive.
'Take care to ensure that prospective franchisees from other countries
truly understand your franchise offering, its costs and fee structures,
and what it is that your franchisees are actually required to do. If
selling or customer contact is involved, be clear about it.
'If you are dealing with people who do not have English as a first
language, be aware that some people may not wish to admit if they do not
totally understand something which you have told them. Check their
understanding regularly, invite them to bring a friend or colleague to act
as translator if they wish, and ensure they take proper legal and
financial advice.
'Provide a "plain English" version of key documents such as the
disclosure document and franchise agreement. A list of bullet points
outlining the major provisions may help to ensure no
misunderstandings.
'And think beyond the recruitment of people to their training and
support. Again, non-native English speakers may need help with the
preparation of a suitable sales script or presenter with which to market
their business initially.'
An Enormous Market
New Zealand is for many the land of opportunity and a highly attractive
place to live and raise a family. A constant flow of immigrants throughout
recent history has enriched our culture, our food and drink, our
industries and our economy, and it will clearly continue to do so.
Immigration clearly offers considerable potential for franchising, too.
The Long Term Business Visa is an excellent concept, which promises a rare
blend of vision, practicality and control. Although it is too early to
pass judgement on its results, as Gerald Delany says, 'If we can ensure
that it works as it is supposed to then it will be great - and potentially
very valuable for franchisors.
'The overseas market is enormous. People are out there looking for
opportunities and growth, and New Zealand is a very attractive destination
for them. If you take time to build the right relationships, and help them
into your systems, you will find a new source of hard-working
business-minded people.'
Ten Franchise Tips for Migrants
1. Only consider franchises that fit with your skills and experience.
Learning to operate a business is enough of a challenge without having to
learn new techniques and skills at the same time.
2. If you are worried about your English skills in meetings with the
franchisor, take along a friend or business advisor to assist in
translation.
3. Never sign anything until you have taken the advice of an accountant
and a lawyer with experience in franchising in New Zealand.
4. Spend at least one day "doing the rounds" with an existing
franchisee; see exactly what is involved in the day to day business.
5. Find out exactly how the business is marketed most efficiently -
personal selling, advertising, word-of-mouth referrals or what.
6. Do the sums. Prepare your own cashflow forecast and budget for the
business and remember to allow for the capital or loan costs of the
franchise. The franchisor's figures will be a good starting point but
every business has its own costs and expenses. Do your own figures!
7. Think about the unique possibilities and competitive advantage you
hold by being a member of a migrant community are there ways of marketing
specifically to your own communities?
8. Remember that having an accent can be a good talking point to get
develop rapport with a client. Never get tired of answering the question
'where do you come from?'
9. Use your recent arrival in New Zealand as a positive factor. Tell
your clients you are keen to grow your business in New Zealand and need
their help with referrals.
10. Be clear about YOUR personal competitive advantages. Don't rely on
the franchise image and advantage to do it all for you.
Gerald Delany, Auckland New Ventures Inc
Simon Lord is Editor of Franchise New
Zealand, where you will find many other articles about franchising in New Zealand. Simon is also a board member of the Franchise Association of New
Zealand and has been involved in franchising for over seventeen years.
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