Although relatively young, franchising offers strong performance and growth projections in New Zealand. Franchising in New Zealand can be estimated to account for $6.5B annual turnover from a conservative estimate of 200 systems. The number of people working within franchising is estimated to be 45,000 in 5,000 franchised and company-owned units. The number of systems, outlets, and those employed in them exhibit steady increase although, following the recent downturn in the economy, the turnover is no longer exhibiting the spectacular 25% increase of a few years ago. Some respondents experienced significant difficulties in their expansion activities. The third annual survey of franchising in New Zealand was conducted in conjunction with a similar study in Australia. The results are collated from 90 Franchise Systems who responded to the questionnaire in New Zealand and 165 in Australia.

Trends that emerge from this study suggest that the demographics of the sector will change in a number of important aspects as the industry matures. Industry groupings will move from predominantly retail to a service basis. While the size of the individual systems will grow, the limited market size will favour overseas expansion. There appears to be a trend for some entrepreneurs to manage a series or group of franchises, some through creating additional franchises and others by buying or merging with existing franchises. The move from permanent staff to a predominance of part-time and casual workers will impact the employment mix. At the same time systems are tending to convert from company-owned to franchised units. Business format franchises fundamentally comprises the following elements: the entire business concept which includes the brand and all intellectual property; a process of induction and training in all aspects of the business according to the business concept that is written up in the business manual(s); a continuing process of assistance monitoring and guidance.

Franchise systems are likely to be the corporate structures of the future. As such they represent an opportunity for management scientists and operations researchers to be involved in setting up the business format’s operating procedures and fine tuning them in response to business and market changes.