Franchise image takes a battering

But the fake franchise victims are considering legal action against the company and the commerce minister is reviewing the industry's code of practice. "We will be asking the hard questions around the legal framework for franchises," Lianne Dalziel said in January.

tvnz.co.nz
February 9, 2008

Franchise image takes a battering

The multi-billion dollar franchise industry is bracing itself for a backlash following the recent Green Acres scandal.

The Serious Fraud Office is investigating after 200 people lost millions buying fake ironing franchises, damaging the reputation of franchising and raising questions about whether tougher rules are needed.

Battery World is New Zealand's latest franchise opportunity in a society becoming more and more dependent on batteries.

General manager James Nixon-Smith says the franchise has experienced significant growth in Australia and thinks "there's tremendous potential".

Battery World is joining one of the world's most franchised markets - from coffee shops to corporate cabs, Kiwibank to Caci clinics and from fast food to Fastway - the world's largest courier franchise.

"Franchising is estimated to be worth more than $10 billion here in New Zealand," says Callum Floyd from Franchize Consultants.

And many franchises don't come cheap. You'll need more than $200,000 to get into Battery World and about $650,000 for a United Video or Kiwibank franchise. McDonalds and Target Furniture cost $500,000 and it's $250,000 for an Esquires coffee or Caci clinic franchise.

However some believe the recent Green Acres scandal has tarnished franchising's image.

Business consultant Hannah Samuels says it may affect the decision-making process of people wanting to invest in franchising.

Keith Lapham is being investigated by the Serious Fraud Office for allegedly selling fake ironing franchises but Green Acres says it's not responsible for his actions.

"We have no legal obligation to make this right," says chief executive Andrew Chisholm.

But the fake franchise victims are considering legal action against the company and the commerce minister is reviewing the industry's code of practice.

"We will be asking the hard questions around the legal framework for franchises," Lianne Dalziel said in January.

The franchise industry believes the Green Acres problem could have been avoided if investors had taken professional advice before they signed up. And they don't think there's any need for tougher rules or regulations.

"It's a different type of problem that's happened here. It seems like an alleged fraud rather than anything to do with franchising practices," says Floyd.

But Samuels says the franchise industry needs some Green Acres damage control.

"The whole value side of things, the ethics side of things, it will have implications for the franchise industry certainly," she says.

And Battery World expects any of its new franchisees to exceed industry standards.

Source: ONE News


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