Franchising seems the easiest way to break into business. But what are the traps for the unwary? John McCrone joins the throng at the Franchise Expo.

Stuff.co.nz:

The smiles are bright, the brochures glossy. But what about the business proposition? Will it really fly? It is a rainy weekend and the Franchise Expo is back in town. The Christchurch Convention Centre is packed with couples, mostly in their late 30s and early 40s.
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They browse the stands and the choice is bewildering. Vibrator gyms, Himalayan goji juice, Tupperware, back supporters, business coaching systems, mini diggers, DVD vending machines, monogram embroidery and rented portacabins.

Which of these is going to be a goldmine and which is going to leave you in hock to the bank for the rest of your life? The experts say it is possible to get burnt by franchise operations after just a sign-up fee. Or ones that are simply such weak ideas that they will never catch on.

However, the good news is that the franchise approach to small business continues to be hugely successful.

And though franchising is still lightly regulated in New Zealand compared with Australia, the industry has become developed enough that it is not hard to sniff out the no-hopers, says David McCulloch of Auckland consultancy The Franchise Coach.

’20 years ago when franchising started, we weren’t so sophisticated. But now the dodgy or ropy franchisors will find it pretty hard to recruit franchisees. There are plenty of lawyers and accountants who are franchise specialists and can give good advice. People are just more streetwise these days.’

Mr McCulloch says no one knows better than the franchise teams at the big banks. They see the profit and loss accounts of thousands of businesses. So… read on.