Study will focus on the fragility of franchise startups
The survival rates of franchise businesses in their formative period will be part of a three-year university study into the popular New Zealand business model.
A University of Canterbury researcher is aiming to provide work this year looking in detail at how business franchises start up, and why some franchisors struggle early on.
Postgraduate student Faith Jeremiah said little was understood about early-stage franchise development.
New Zealand is the most franchised nation in the world per capita, and she wanted to find out why they formed part of the fabric of the country as part of a three-year PhD study at the university.
New Zealand has 423 active franchise systems, and despite the economic downturn, the total number of franchises increased 5.3 percent in 2010, according to the university.
The franchise sector employs over 80,000 people, mostly full-time.
Franchising was one of the most rapidly developing business models in New Zealand and internationally, which made the study significant, Jeremiah said.
As part of her Bachelor of Commerce degree with first-class honours, completed last year, she had examined in some detail mobile franchise systems, such as mowing services and ice-cream vans that made up around 42 per cent of total franchises in New Zealand.
Jeremiah said she was still at the stage of forming the upcoming PhD study. But she wanted to look at the franchisors' business development processes across New Zealand in order to better understand the relationship between the start-up stage and business longevity.
A franchisor owns the overarching company, trademarks, and products - then sells individual units to franchisees.
"The study will look at franchises across the business sector and explore issues relating to franchise development . . ." Jeremiah said.
"It is an area that hasn't been researched very well. Because there can be a high failure rate in the initial stages of franchising in the first few years . . . I'm looking at it from the franchisors' perspective. From what I've read from the literature, franchisors when they start franchising they end up in the first few years stopping and they'll just do chain stores."
The work over three years will also focus on franchise development practices and identities. The owners' motivations, aspirations, business history and social network development will also be examined.
Jeremiah said research suggested franchises failed because of inappropriate groundwork and lack of suitable planning. She would eventually develop a conceptual model for a franchise start-up.
The findings would probably be of interest to those wanting to enter the industry, existing franchisors and franchisees. Financial , tertiary and economic development institutions were also likely to take an interest.
Jeremiah graduated top of her management class last year. She will do her postgraduate research under supervising lecturer Associate Professor Colleen Mills, starting from March 1.