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Franchising not all sunshine and roses

Many New Zealand franchisees are disappointed with their business experience due to conflict with franchisers, a Massey University study has found.

Towards Understanding and Resolving Conflict: Franchising in New Zealand 2011 is the first major report to focus on conflict in this sector.

Dr Susan Flint-HartleThe study found 25 percent of respondents said their franchising experience did not meet their expectations.

More than a quarter of those surveyed said they had experienced some conflict with their franchisor over issues such as franchisor control, lack of profitability and agreements they considered unfair.

The report highlighted communication and conflict resolution as key areas of improvement. However, a more pressing problem was that most franchisors were in fact unaware of any problems.

“What is interesting is that franchisees have a very different view to franchisors over how satisfying the relationship is,” said Dr Susan Flint-Hartle, a senior lecturer at Massey’s School of Economics and Finance and author of the report.

According to the study, "it can be said that conflict is not well handled by franchisors and often the outcomes are seen as unsatisfactory by franchisees”.

In fact, 40 percent of franchisees involved in disputes said the problems were never resolved. And almost 30 percent of franchisees who were able to resolve their issues said the resolution was unsatisfactory.

Very few felt they were sufficiently prepared for owning a franchise.

Dr Flint-Hartle said there were currently no re-education programmes for would-be franchisees in New Zealand, although Massey was working towards initiating one of its own.

“If two businesses are working happily together, they will be more productive and profitable,” she said. “That is important because the franchise sector not only provides employment for thousands of New Zealanders but contributes significantly to the New Zealand economy.”

The study will be followed up later this year by Massey University’s second Franchising New Zealand report. The report will be published at the end of 2012.