Many overseas franchising systems are coming into New Zealand at present. This is because New Zealand is a good place in which to establish a franchise: the number of systems operating in the country has grown at a rate of over 20% during the last year.

New Zealand is seen as a deregulated country in which small to medium-size businesses thrive and is easy to enter. Double taxation treaties with most countries make the repatriation of income from New Zealand to the overseas country a straightforward matter, with tax credits being given and being claimable in the overseas country.

Most importantly, New Zealand has a voluntary Code of Practice. Overseas systems from Australia and the United States must comply with mandatory disclosure legislation. In the United Kingdom there is no specific legislation on the matter but it is still recommended for a franchisor to publish a disclosure document. This sets out the personal details and experience of the franchisor and is also an excellent marketing tool.

Franchise agreements must usually be modified for use in New Zealand, but not to a great extent. Most overseas documents are too complex for New Zealand and could thus be shortened. It is a bad idea to use an unamended overseas document, as potential franchisees might be deterred by its complexity. However, the franchise agreement must always be legally sound as well as being fair.

The trend of overseas systems setting up in New Zealand looks set to continue. However, as confirmed in the 2001 Franchising Survey, 77% of franchising operations originate in New Zealand, which shows that overseas systems entering New Zealand do not dominate the market, only accounting for one-quarter of all systems operating there.

For further information on this topic please contact Stewart Germann at Stewart Germann Law Office by telephone (+64 9 308 9925) or by fax (+64 9 308 9922) or by email ([email protected]).