How does a franchise in New Zealand work?
At its core, franchising is a method of distributing an established business system to new territories. A crucial document is the franchise operations manual which is an extremely detailed document of the franchisors proven commercial systems and success. This manual will specify exactly how the business should be operated. In addition, a comprehensive franchise agreement is drawn up. This agreement covers: • The franchisee’s rights to use the system and the brand. • Where the business can be operated (territory), over what time period, and if the license is exclusive or otherwise. • What fees are payable to the franchisor, which may include marketing and advertising fees, as well as a percentage of profits. • Conditions on the property in which the business is operated from (upgrades may be compulsory from time to time and certain standards must be adhered to). • Products or services for sale will be restricted (for instance, a McDonald’s franchisee would not be allowed to sell alcoho
