Frequently Asked Questions
Here are some commonly asked questions and issues where previous experience tells us that there can be misunderstandings.
- 1. Will this be my own business, am I in control?
Yes and No. You are granted the rights to operate the Provender NZ Ltd Franchised Business. That right can be withdrawn under the terms of the Franchise Agreement (covered separately). You are responsible for all the day to day activity and meeting your obligations to the Franchisor. There are controls and responsibilities in the application and operation of the Franchised Business.
- 2. What is a "system"?
The system is the methods used for operating the Provender NZ Ltd Franchised Business that are set out in detail in the Provender NZ Ltd Operations Manual. You are required to follow the system and implement it. If you don't like following a system or adhering to the rules you should reconsider purchasing a franchise.
- 3. What if I have a really good idea to improve the day to day running of the Franchised Business?
Over the years much of what has evolved has come from Franchise Owners and after Consultation with the Franchisor is implemented by all. Ideas and initiatives are welcome but must be approved by the Franchisor before use. Procedures for offering and trying ideas are set out in the Operations Manual.
- 4. Can I differ from the prescribed operational methods as described in the Operations Manual?
Short answer - No! The secret to the success of franchising is in the application and operation of the systems. In extremely rare circumstances exceptions may be made and would be dealt with on a case by case basis and have to be approved in writing by the Franchisor.
- 5. Am I obliged to share information with the Franchisor, e.g. Annual accounts, GST returns, daily, weekly and monthly reports, customer details?
Yes. The Franchisor has the right to request any information that relates to the Franchised Business and providing that information is a requirement of the Franchise Agreement. Sharing information amongst all Franchise Owners is beneficial to all parties – where am I in the scheme of things, how could I improve, are questions you will be able to answer when reading what others are achieving. The Franchisor will ask you for weekly activity reports to monitor and assist you when necessary to overcome challenges and blocks in achieving goals and targets.
- 6. What happens if I don't want to provide information?
The Franchisor is within its rights to terminate the franchise relationship putting at risk your investment and effort. This is not a situation the Franchisor ever wants to reach and generally not one for the Franchise Owner. The Franchisor has a Customer Management System of data information that Franchise Owners input at sites.
This provides regular and daily updates on progress to ensure that the Franchisor can deliver assistance where it is needed in a timely manner. Additionally, comparative data shows how one franchise is tracking against another – by region or by Franchise Owner.
- 7. Will I have an exclusive territory?
No. Provender NZ Ltd Franchise Owners do NOT operate in exclusive territories. All Provender NZ Ltd Franchised Businesses operate within broad boundaries that are set by economic parameters. For example, all of Christchurch may be an economic boundary while north and south of the Harbour Bridge may apply in Auckland. The Franchisor wants to avoid the situation where Franchise Owners travel extreme distances uneconomically. The Franchisor may grant the right to another Franchise Owner to evaluate or sell products at sites within the boundaries defined in your Franchise Agreement with the proviso that they are not to evaluate or sell the same products at sites that are currently being managed and serviced by you. The strength of the system will come from this, a cornerstone principle, designed to give Provender NZ Ltd the greatest penetration in the market.
- 8. What happens if a customer moves?
You may follow a customer, assuming they have stayed within the same general area and retain them as a customer. Alternatively you may consider trading a customer to another Franchise Owner for a mutually agreed value. Your Business Development Manager can advise you on this matter.
- 9. What is meant in the Franchise Agreement by "the same products at sites that are currently being managed and serviced by you (me)"?
In the Provender NZ Ltd system a variety of products are offered to customers. These currently include snacks, hot and cold drinks and on occasions, fresh food. A Franchise Owner who does not offer, for example, hot drinks to a customer, will both forfeit any rights to that option and open the door for to another Franchise Owner resulting in 2 Provender NZ Ltd Franchise Owners delivering products to that same customer. This could result in you losing a customer. We recognise that the interests of the system and the customer are greater than the interests of the individual Franchise Owner.
- 10. Do I have to offer all the products and services that Provender NZ Ltd offers or could I concentrate on one thing in particular?
In brief, yes. There may be circumstances where it is uneconomic to offer all or deliver on every facet of the Provender NZ Ltd range but this will be decided in consultation with the Business Development or Franchise Manager. As with any business we do not want to create openings through which competitors can drive.
- 11. This is a cash business - will I be required to declare all of it?
You must meet all your obligations as prescribed by the Inland Revenue Department and your Franchise Agreement. Cash businesses are subject to more "rigorous" investigation by the Inland Revenue Department. Audits and internal checks are carried out by the Franchisor from time to time to ensure all moneys are accounted for.
- 12. What if I'm caught out for under declaring cash or sales?
This is an offence that the IRD deals with harshly and again you put the Franchised Business at risk of being terminated by the Franchisor. It could lead to the Franchised Business being sold from under you with no compensation whatsoever.
- 13. If I saw a product we sell available at a lower purchase price elsewhere could I purchase it to take advantage of the lower price?
Not at all. This is another cornerstone principle. The Provender NZ Ltd franchise system offers many advantages, some tangible and some intangible. It is however a package deal and supply of product at a consistently competitive price is part of the package. There are often sellers in the market who can offer lower prices for a line of product for a limited time or quantity. The Franchisor cannot combat this however the Franchisor endeavours to ensure that the average cost of ALL products is competitive. The Franchisor also recognises that suppliers support the Provender NZ Ltd franchise as a whole and these costs have to be met. From time to time there will be specials when the Franchisor negotiates prices on your behalf and arranges deliveries which means you can concentrate on making money by working on the customer relationships and growing sales at each site, not spending time purchasing which does not make you money.
- 14. Will I be sent stock I haven't ordered?
Yes. The Franchisor will from time to time negotiate package deals on product that can be regarded as a quick seller and may have a short date to expiry. In this situation the Franchisor has to commit to a specific volume of product and this will be allocated to all Franchise Owners with selling instructions.
- 15. How long is the term of the Franchise Agreement and what does it mean?
Each term of a Provender NZ Ltd Franchise Agreement is for 20 years with two renewals each of 10 years. A term is the number of years for which you have been granted the rights to operate the Franchised Business that you intend to purchase. The term is a diminishing one that ends at a point in time specified in the Franchise Agreement.
The longer the term of the Franchise Agreement, the greater the security for the Franchisee and the greater the value of the business.
It could best be compared to a lease on a motel or commercial building. The Franchisor "owns the building (the system)", the Franchisee (Franchise Owner at Provender) is being granted the right to use "the space" (the operating system) to operate the business.
The longest serving Provender Franchise Owner has been with us since 1992 and our oldest retired at 82.
- 16. What happens at the end of the franchise term and at the end of each renewal period?
Contained in the Franchise Agreement are steps for renewal of the Franchise Agreement at the end of each renewal period. Not following these steps could lead to termination of your Franchise Agreement. The onus is on you the Franchise Owner to perform the tasks required to operate the Provender NZ Ltd Franchised Business in accordance with the Franchise Agreement and Operations Manual. If there have been periods of continual frustration and non compliance or non performance then your Franchise Agreement may not be renewed. That is an extreme situation and there will have been ongoing dialogue between you and the Franchisor about any issues.
If this situation does NOT exist the Franchisor may renew the Franchise Agreement and the relationship continues. The cost of renewal is currently set at $1000 + GST to meet some of the costs incurred by the Franchisor. For Franchise Owners who have consistently grown sales within a specified range then that fee is waived. At the end of the last term the Franchisor still needs to transact business and is unlikely to discontinue with a quality Franchise Owner. At the time this is being written the renewal fee for a further term is a percentage of the standard franchise fee for a new franchise.
- 17. When purchasing the Franchised Business - what is negotiable, what isn't?
The Franchisor assists the prospective purchaser in arriving at fair value. The items that are fixed are stock at cost, merchandising aids or equipment that is brand new, equipment or tools that are necessary to bring the Franchised Business up to the standards of a Provender NZ Ltd Franchised Business that complies with the Operations Manual and Franchise Agreement.
The Business Development Manager can assist and advise in the valuing of stock, existing merchandising aids, plant, etc. This is for the purchasers' protection as you are unfamiliar with what is "fair". The Franchisor may choose to supply you with quantities of merchandising aids and stock that is necessary to operate the Franchised Business successfully and this is at the Franchisor's sole discretion.
You may wish to negotiate, or the Business Development Manager may on your behalf, with the vendor on goodwill (if applicable), van (if purchasing), tables, shelves, van graphics, vending machines and a coin counter if applicable.
- 18. Is this a lifestyle job?
This is not a "job", it is a business. Businesses come with advantages and disadvantages that include many different aspects. As the business owner it is your responsibility to operate the business within the system and rules that exist. There are many benefits to owning a Provender NZ Ltd Franchised Business such as flexible hours, a home base, tax benefits and working with other family members. What remain paramount is that first and foremost this is a commercial business with commercial objectives.
If you would like to operate within a lesser timeframe than Monday to Friday advise the Franchisor at the outset. If the Franchisor knows at the outset you intend to play golf every Wednesday that removes surprises later and frustration that may be born out of failing to meet pre agreed targets. The Franchisor wants you to enjoy your life AND meet your obligations. Spelling out everyone's goals in the beginning cannot be over-emphasised. The Provender NZ Ltd system has ambitious growth sales goals. The Franchisor is looking for like-minded people with drive and energy to implement these growth strategies for the benefit of both the Franchise Owners and the Franchisor.
- 19. Will I be under pressure?
You may be at times, particularly if you are losing customers, sales or performance is down and direction is lacking.
- 20. What if I lose customers?
This is a very important part of the franchise. The Franchisor accepts that customers come and go. What is not acceptable is to lose a customer and not replace that customer. What is also not acceptable is to fail to act early in coming to an answer that may have prevented loss happening. There is an incentive programme in place to both discourage losing customers and to reward retaining customers. Take action early to avoid concern later.
- 21. What can I do if I feel the Franchisor is pressuring me?
Firstly, speak to your Business Development Manager and if you are still dissatisfied speak to one of the company directors or your Provender NZ Ltd Franchise Council contact person or Chairman. The obligation of the Franchisor is to assist you as much as practicable although the ultimate responsibility for implementing advice is yours. The Franchisor cannot do your job for you. Recognise also, that if you are struggling to perform then your interests and the Franchisor's interests may be going down different roads. At that point it may be necessary for both parties to reconsider their relationship.
- 22. What do the franchise training, disbursement & fees cover?
The costs incurred by the Franchisor from day 1 including time spent on interviews, meetings, telephone call and conversation costs, preparation of documents, legal fees, time costs in dealing with your lawyers, accountants, professional advisors, training costs incurred by the Franchise Management Office, document execution, consumables, staff time, field & IT training and management.
- 23. Who attends training?
The person or people who will undertake the majority of the "day to day" business. For couples the Franchisor recommends both attending so that you can talk about the business together.
- 24. What type of van will I need?
It is mandatory that you have a sign written SILVER van and it needs to be in a very tidy condition. The Franchisor recommends a long wheel base, 5 door. Examples are Toyota Hiace, Nissan Caravan, Mitsubishi L300, Hyundai iLoad & Mercedes, VW, Ford variants. It is critical to adhere to this and all the Franchised Business requirements in respect of image and fitting out the van. Talk to the Franchisor BEFORE buying anything!
- 25. What type of computer will I need and how good at using it do I need to be?
Requirements vary from year to year. The Franchisor retains the services of different specialists and they can advise you at the time. You will receive training on the Customer Management System™ during training. If you have no experience in operating a Windows based computer; it is recommended that you undertake training at a community education facility prior to commencing the Franchised Business.
- 26. Do I need a mobile or smart phone?
Yes you must have one. Your mobile phone number will appear on your van, merchandisers and vending machines that you have. This way customers will be able to contact you and you will be able to respond quickly to customer enquiries. It also allows suppliers and the Franchisor to contact you during working hours. The Franchisor can advise you on call plans. An 0800 number attached to the cellphone is a good idea. A smartphone is ideal for data management.
- 27. What is involved in preparing a business plan for my proposed Franchised Business?
At the Auckland based training your Business Development Manager will with his knowledge of the vendor's Franchised Business, combined with the comparative data of other Provender NZ Ltd Franchised Businesses, plan a growth strategy with you. This is a simple process of committing to maximise all of the opportunities available at every site.
- 28. Is the Sale and Purchase Agreement, if used, a binding agreement?
Yes it is - subject to the conditions contained within. The Franchisor strongly recommends that you do not sign anything with a real estate agent or the vendor until you have agreement and approval of your Franchise Application from the Franchisor. If you sign the Sale and Purchase Agreement you are able to null and void the Sale and Purchase Agreement by not signing the Franchised Agreement.
- 29. How much working capital do I need?
Working capital is the money you need to help you through the lean periods, fund growth and ensure you can meet your financial commitments. It will also help you out when the unexpected occurs, van motor repairs, urgent operation, taking advantage of a good purchase option for stock. As a guide, the equivalent of 1 week's sales would be a minimum.
- 30. What happens if one of the Franchisor directors dies?
There are two Franchisor directors and two families involved. Both have considerable commercial skills and resources available to ensure that the Provender NZ Ltd Franchised Business continues with the same objectives. Additionally there is a very strong and capable management team in place to continue day to day operations.
- 31. What happens if the Franchisor company is sold?
If that were to happen, any purchaser would be bound by the existing Franchise Agreements to observe the conditions contained therein. It is reasonable to assume that the Franchisor would only be purchased by an organisation that either wanted to add value or continue the same line of work. That purchaser would have their money at stake as well.
- 32. What is the Marketing Fund & how much do I contribute?
All Franchise Owners contribute 1% of monthly sales to a fund from which costs like Special Olympics sponsorship are met, Franchise Council is supported, promotions are run, competitions are operated, various messaging and branding tools are paid for and the Provender NZ Ltd National Conference costs met, as examples. All the money contributed is spent for the benefit of the Franchise Owner contributors.
- 33. What is the Franchise Council and how much does it cost me?
The Franchise Council is a policy advisory body that meets 3 times per year plus at the annual Provender NZ Ltd conference and includes Franchise Owner and Franchisor representatives. The Franchise Council cannot make decisions that are binding but given that they represent the interests of the franchise as a whole they generally only act in the interests of everybody. Funding is provided by the Franchisor and the Marketing Fund.
- 34. How much space will I need for stock?
This will vary from franchise to franchise depending on the number of customers. We recommend that you speak to other Franchise Owners with a similar number of customers for advice. As a guide, about ½ a double garage.