# Franchise vs Independent Business: Which Should You Buy in NZ?
One of the biggest decisions any prospective business buyer faces in New Zealand is: should I buy a franchise or an independent business?
Both options have passionate advocates — and passionate critics. The truth is, neither is inherently better. The right choice depends on your personality, capital, experience, and goals. This guide gives you a clear, honest framework for deciding.
Understanding the Franchise Model
A franchise is a business that operates under an established brand and system. You pay a franchisor for the right to use their name, products, processes, and ongoing support. In return, you follow their rules.
In New Zealand, the franchise sector contributes approximately $27 billion to the economy and employs around 124,000 people across more than 630 franchise systems.
What You Get with a Franchise - A proven business model with documented systems - Brand recognition that attracts customers from day one - Training and ongoing operational support - Marketing provided (or coordinated) at a national level - Established supplier agreements with negotiated pricing - Territory protection (in most systems)
What You Give Up - Freedom to set your own menu, pricing, or product range - A percentage of your revenue in ongoing royalties (typically 5-8%) - An upfront franchise fee ($20,000–$80,000+ depending on the brand) - Marketing fund contributions (typically 2-3% of revenue) - The ability to sell to whoever you want (buyer must be approved by franchisor)
Understanding Independent Businesses
An independent business is one that operates under its own brand. You're the boss. You decide everything — the name, the products, the hours, the pricing, the suppliers, the direction.
What You Get with an Independent Business - Complete creative and operational freedom - No ongoing royalties or franchise fees - Ability to pivot quickly if the market changes - Full ownership of the brand and goodwill you build - Freedom to sell to any buyer without franchisor approval - Potentially higher profit margins
What You Give Up - You're on your own — no proven system to follow - Brand recognition must be built from scratch (if buying an established one, it's already there) - Marketing is entirely your responsibility - Supplier negotiations start from zero - Higher risk if you lack industry experience
Head-to-Head Comparison
| Factor | Franchise | Independent |
| Startup risk | Lower — proven system | Higher — no guarantees |
| Initial cost | Often higher (franchise fee + fitout to spec) | Varies widely |
| Ongoing costs | Royalties + marketing fund (7-11% of revenue) | None beyond normal expenses |
| Freedom | Limited by franchise agreement | Complete |
| Support | Ongoing training, ops support, marketing | None (you source your own) |
| Brand recognition | Immediate | Must be built or inherited |
| Resale value | Generally stable | Highly variable |
| Income potential | Capped by royalties but more predictable | Uncapped but less predictable |
| Exit flexibility | Must sell through franchisor approval | Sell to anyone, anytime |
Cost Comparison: Real NZ Examples
Franchise Example: Cafe Franchise
| Cost Component | Amount |
| Franchise fee | $40,000 |
| Fitout to brand standards | $280,000 |
| Equipment | $120,000 |
| Training costs | $5,000 |
| Working capital | $50,000 |
| Total | $495,000 |
| Ongoing royalties | 6% of gross revenue |
| Marketing levy | 2% of gross revenue |
Independent Cafe Example
| Cost Component | Amount |
| Business purchase price | $250,000 |
| Working capital | $40,000 |
| Minor refreshment/updates | $20,000 |
| Total | $310,000 |
| Ongoing royalties | $0 |
| Marketing levy | $0 |
In this example, the independent cafe costs $185,000 less upfront and has no ongoing royalty burden. However, the franchise comes with brand power, a turnkey setup, and operational support.
Popular Franchise Systems in New Zealand
New Zealand has a thriving franchise scene. Some well-known systems include:
Food and Beverage:
- Subway, McDonald's, Domino's Pizza
- Robert Harris, Columbus Coffee, Tank Juice
- Hell Pizza, Sal's Pizza
Services:
- CrestClean, Green Acres
- Hire A Hubby, Laser Plumbing
- Jim's Group (mowing, cleaning, fencing)
Retail:
- Paper Plus, Unichem Pharmacy
- Z Energy, BP
Each has different investment levels, from $30,000 for a service franchise to $1 million+ for a major fast-food outlet.
Decision Framework: Which Is Right for You?
Choose a Franchise If: - You're new to business ownership and want guidance - You prefer a proven, step-by-step system - You don't mind following rules and brand standards - You value lower risk over maximum freedom - You're comfortable paying ongoing royalties for support - You're applying for a business visa (franchises can be easier to justify to INZ)
Choose an Independent Business If: - You have industry experience and know what you're doing - You want complete creative and operational freedom - You don't want to share your profits through royalties - You're confident in your ability to market the business yourself - You want maximum flexibility in how you run and sell the business - You enjoy building something uniquely yours
Consider Buying an Existing Franchise Resale
There's a middle ground: buying an existing franchise location from a current franchisee. This gives you:
- A proven location with existing revenue
- The franchise brand and support system
- Lower risk than a greenfield franchise start-up
- The ability to evaluate actual financial performance before buying
You can find franchise resale opportunities on platforms like OpenBiz alongside independent businesses.
Legal Protections for Franchise Buyers in NZ
New Zealand does not have specific franchise legislation like Australia (which has the Franchising Code of Conduct). However, franchise buyers are protected by:
- Fair Trading Act 1986 — prohibits misleading and deceptive conduct
- Contract and Commercial Law Act 2017 — governs contractual obligations
- Franchise Association of New Zealand (FANZ) — member franchises must follow the FANZ Code of Practice and provide prescribed disclosure
Always have a commercial lawyer review the franchise agreement before signing. Pay particular attention to:
- Term and renewal rights
- Territory exclusivity
- Exit and termination clauses
- Restraint of trade provisions
- What happens if the franchisor goes bankrupt
Final Verdict
There's no one-size-fits-all answer. A franchise offers lower risk and proven systems but comes with ongoing costs and limited freedom. An independent business offers unlimited potential and total control but demands more from you as an owner.
Whichever path you choose, start by researching the market thoroughly. Browse current opportunities on OpenBiz, use the free AI valuation tool to gauge fair prices, and consult with professionals before committing your capital.
Disclaimer: This article is for informational purposes only and does not constitute professional advice. Consult a licensed professional before making any business decisions.