New Zealand remains the most popular destination for Australian franchisors to expand their network. In 2016, a Franchising Australia survey revealed that 70% of franchisors are targeting New Zealand as part of their international expansion strategy. Australian franchisors are attracted to the similar business environment and geographical distance to springboard their international growth. But before expanding, you should first consider these five questions.
Do I Need to Register My Trade Marks?
You should register your brand name and logo as trade marks in New Zealand to prevent competitors from taking advantage of the reputation you have built in Australia. The registration process is similar to Australia. The Intellectual Property Office of New Zealand (IPONZ) overseas trade marks in New Zealand.
Be careful of discussing your intention to enter the New Zealand market before you have secured a trade mark. Any discussions with a supplier or potential franchisee that happens before lodging your trade mark application should be subject to a non-disclosure agreement (NDA). An NDA will protect you from any unauthorised use or theft of your brand.
Following registration, ensure that you:
- use your trade mark in New Zealand regularly; or
- launch your business venture or franchise network shortly after submitting your trade mark application.
If you don’t use your mark for any consecutive three year period, a third party can apply to the IPONZ to have it removed from the register.
Māori Words and Signs
The New Zealand regime also protects trade marks which resemble Māori words and signs (the Māori are the indigenous people of Aotearoa New Zealand). IPONZ will assess each application to determine whether it contains Māori text or imagery. If your trade mark falls into this category, your application may be unsuccessful — even if your mark does not have a meaning or origin connected to Māori. You may then have to re-brand or pursue a different protection strategy.
Do I Need a New Operations Manual?
You should be able to use most of the material from your existing Australian operations manual, and adapt it where required for the New Zealand market. These adaptations may include:
- changes to processes, procedures or recipes due to suppliers and geographical factors;
- any operational changes that result from a change in business; or
- differences in trends and fashions in New Zealand compared to Australia.
It’s advantageous to structure your New Zealand operations as similar to your Australian franchise network. After all, your Australian model has already proven successful. It’s also easier to manage your operations in both countries if they operate in similar ways.
If you grant a master franchise or enter into an area developer agreement for New Zealand, your operations manual will need to include instructions on how to run multiple unit franchises (i.e. multiple franchises in one particular territory). If you grant these rights to a third party, the operations manual should focus on head office operations, recruitment and marketing, as well as the information relating to the day-to-day running of the franchise business.
Do I Need To Adhere to a NZ Code of Practice?
New Zealand does not have any franchise industry-specific legislation equivalent to the Australian Franchising Code of Conduct. You don’t need to be a Franchise Association of New Zealand (FANZ) member to franchise in New Zealand. But it’s a sign of reassurance for potential franchisees if the franchisor is a member of FANZ and as a result, adheres to both the Franchising Code of Practice and the Association’s Code of Ethics. A franchisor must renew their certificate of compliance each year to remain a member of FANZ.
As a member of FANZ, a franchisor must produce a disclosure document every year. The requirements of this document, set out in the table below, are similar to the Australian equivalent.
|Disclosure Document Requirements|
|How often are Disclosure Documents Issued?||Yearly|
|Who Receives the Disclosure Document?||Prospective franchisees|
|When do Franchisees Receive a Disclosure Document?||At least 14 days before the signing of documents and entering into the franchise agreement|
|What Must a Disclosure Document Include?||7 day cooling off period from the date of execution, to allow the franchisee to terminate the franchise agreement.|
Do I Need a New NZ Franchise Agreement?
You would likely use your existing Australian franchise agreement as a basis to develop a franchise agreement for your New Zealand network. A franchise lawyer can help modify your agreement to ensure that it complies with New Zealand laws. After you have finalised this document, you can then start recruiting franchisees and building your network.
What Franchise Management Issues Could I Face?
You will need to decide how to manage the network best — especially if your operations remain based in Australia. When choosing a New Zealand franchisor, you can::
- operate from the Australian franchisor entity, or
- form a newly incorporated company in Australia, or
- form a newly incorporated company in New Zealand.
You should discuss your options with your accountant in regards to collecting fees from the franchisees and any tax liabilities.
You may also require someone based in New Zealand to help train, manage and assist the franchisees and to ensure they are maintaining the standards you have set. Managing the New Zealand franchise network from Australia, without a master franchise agreement or area developer agreement in place, may stretch your resources and lead to franchisees failing to comply with the franchise agreement or operations manual.
New Zealand is an attractive option for Australian franchisors looking to dip their toes into international expansion. Ensure that before you set up your network that you register your trade marks in New Zealand. Also, consider joining FANZ as a member to signal to prospective franchisees that you comply with their Codes.
If you intend to expand your franchise network internationally, whether into New Zealand or any other country, we can help. Get in touch with our specialist franchise lawyers on 1300 544 755.
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