Page 5 of 5
Title / Investigate and evaluate small business franchising options
Level / 6 / Credits / 10
Purpose / This unit standard is relevant for evaluation of franchising as an option for small business operations, and for providing advice for prospective franchisers and franchisees.
People credited with this unit standard are able to: identify the core elements of business franchise ventures; determine the essential requirements for establishing franchise business operations; and evaluate franchise proposals.
Classification / Business Environment > Business Culture and Environment
Available grade / Achieved
Explanatory notes
Small business enterprises are diverse, and investigation and evaluation of franchising options could require consideration of a range of current legislation, such as – Commerce Act 1986; Resource Management Act 1991; Sale of Goods Act 1908; Fair Trading Act 1986; Consumer Guarantees Act 1993; Health and Safety in Employment Act 1992; Employment Relations Act 2000; Companies Act 1993; Income Tax Act 2007; Goods and Services Tax Act 1985.
Outcomes and evidence requirements
Outcome 1
Identify the core elements of business franchise ventures.
Evidence requirements
1.1 Types of business franchises are identified and key factors differentiated.
Range franchise types – integrated business operations; single product or service operations; manufacturing and wholesale; manufacturing and retail; wholesale and retail; retail product; retail service; ideas; intellectual property.
1.2 The concept of franchising is interpreted in terms of individual business enterprises linked under agreed business terms to offer standardised products and/or services in specified areas with mutual marketing strategies and selling techniques.
1.3 Franchise types are identified in relation to existing franchise business operations.
1.4 The business idea to be franchised is defined and evaluated in terms of suitability for franchising, track record in the marketplace if an existing franchise operation, or likelihood of success in the marketplace if a new franchise operation.
1.5 Sample cost structures of franchise operations are identified in terms of resources, benefits, rights included in the cost, payments and liabilities for products and/or services, goodwill, royalties, and other resources.
1.6 Responsibilities of franchiser(s) are investigated in relation to specific franchise venture operations.
Range responsibilities may include but are not limited to – supply of products and/or services; product and/or service quality provisions; business training support; operational support; marketing and promotion support; provision of financial and statistical information on overall performance of group operations; financial and statistical services to franchisee; franchise establishment support; risk management support; dispute negotiation procedures; legal and regulatory compliance assurance.
1.7 Responsibilities of franchisee(s) are investigated in relation to specific franchise venture operations.
Range responsibilities may include but are not limited to – capital requirements; form and terms of payment for franchise; royalty payments; goodwill payments; skills and expertise; personal work commitment; operational, marketing, and promotional requirements; reporting; organisational responsibilities; term of involvement.
Outcome 2
Determine the essential requirements for establishing franchise business operations.
Evidence requirements
2.1 The need for strong and durable business franchise concept(s) is investigated and determined in terms of potential to establish a positive business image and viable franchise operation.
2.2 The principles of franchiser organisations are assessed in terms of reputation, business expertise, and financial stability.
2.3 The range, availability, and quality of products, services, ideas, and intellectual property are determined in relation to similar products in the marketplace.
2.4 The structure of the franchiser organisation is analysed, and the number of franchise outlets to be established and the capacity of the business venture to support franchise outlets is determined and evaluated as franchise establishment considerations.
2.5 For an existing business venture, the viability of establishing franchise outlets is determined in relation to previous business performance, organisational and financial structure, business life cycle stage, and capacity of the organisation to support franchise outlets.
2.6 For an established franchiser, the performance of previously established franchise outlets is determined and contrasted with franchiser projections.
2.7 Business performance of competing businesses and franchise operations is researched and evaluated for its impact on the proposed franchise operation.
2.8 Resources, expertise, and benefits to be provided by the franchiser are determined in relation to the needs of the proposed franchise operation.
2.9 Resources, business background, expertise, and benefits required by the franchisee are determined in relation to the needs of the proposed franchise operation.
2.10 The franchise business plan is evaluated in terms of business establishment, operation and development strategies, and strategies are assessed in relation to undertakings given and projections made.
2.11 The operations manual for franchise operations is evaluated in terms of adequacy for the nature of the operations and the franchisee's ability to achieve operational standards and targets.
2.12 The nature and extent of marketing and promotional resources and support are determined in terms of adequacy to support franchise concept and meet marketing goals.
2.13 Communication needs are determined, and proposed processes and channels are assessed in terms of their effectiveness in meeting identified needs.
2.14 Site selection parameters are obtained and reviewed for their ability to meet franchise performance projections.
Outcome 3
Evaluate franchise proposals.
Evidence requirements
3.1 Franchiser proposals are evaluated and assessed in terms of attractiveness and viability of franchise operation.
Range franchiser proposals may include but are not limited to – range, availability, and quality of products, services, ideas, intellectual property; franchise area and territorial rights; distribution arrangements; marketing and promotion support and requirements; royalty levels and responsibilities; legal and regulatory requirements; training support; operational support; administrative support; pilot operation opportunities.
3.2 Costs of investment in the franchise are established and the attractiveness of franchise investment is assessed in comparison with other forms of investment available.
Range franchise costs – franchise purchase cost and payment terms; franchise fees; asset and liability specifications and costs; availability, extent, and cost of franchiser finance; availability, extent, and cost of external finance; goodwill cost; royalty, trademark, patent cost(s); costs of management services; costs of operational support; marketing and promotion costs.
3.3 Resource levels and costs, operating plans, and operating methods are evaluated in terms of adequacy to meet the requirements of the proposed franchise venture operations and ability to attain projected revenue and profit projections.
Range resource levels and costs may include but are not limited to – inventory levels and costs; pricing structures, and pricing standardisation requirements; operational, training, and organisational support provisions and costs; product and/or service supply undertakings; quality assurance provisions and costs; marketing and promotion resources and costs.
3.4 Provisions for the supply and interpretation of business information and statistics for overall franchiser organisation and individual franchise operation are identified and evaluated for their ability to support the business operation.
3.5 Resources, expertise, and benefits to be provided by the franchiser and franchisee are established and evaluated for their adequacy for the proposed franchise venture.
3.6 Financial and business capacity of franchiser principals and organisation are assessed in terms of ability to meet undertakings to the proposed franchise venture.
3.7 Financial and business capacity of franchisee is assessed in terms of ability to meet undertakings for the proposed franchise venture.
3.8 Business performance of previously established franchise operations is reviewed, and results are contrasted with undertakings given by franchiser.
3.9 Provisions for the parties to assess franchise business performance in relation to projections and review and renegotiate aspects of the franchise arrangements are interpreted and evaluated.
3.10 Provisions for sale of the proposed franchise operation are interpreted, and rights of franchiser and franchisee are evaluated in terms of meeting their respective needs.
3.11 Provisions for rights and responsibilities of the franchiser and franchisee at the conclusion of the franchise period are interpreted and evaluated in terms of meeting their respective needs.
3.12 Relevant information gathered from evaluation of franchise proposals is specified and conclusions that communicate results of the evaluation in a manner and form that meets user requirements are formulated.
This unit standard is expiring. Assessment against the standard must take place by the last date for assessment set out below.
Status information and last date for assessment for superseded versions
Process / Version / Date / Last Date for Assessment /Registration / 1 / 22 February 1996 / 31 December 2015
Revision / 2 / 12 May 1999 / 31 December 2015
Revision / 3 / 8 February 2001 / 31 December 2015
Revision / 4 / 12 January 2006 / 31 December 2015
Rollover and Revision / 5 / 22 August 2008 / 31 December 2015
Rollover and Revision / 6 / 20 September 2012 / 31 December 2018
Review / 7 / 19 May 2016 / 31 December 2018
Consent and Moderation Requirements (CMR) reference / 0113
This CMR can be accessed at http://www.nzqa.govt.nz/framework/search/index.do.
Please note
Providers must be granted consent to assess against standards (accredited) by NZQA, before they can report credits from assessment against unit standards or deliver courses of study leading to that assessment.
Industry Training Organisations must be granted consent to assess against standards by NZQA before they can register credits from assessment against unit standards.
Providers and Industry Training Organisations, which have been granted consent and which are assessing against unit standards must engage with the moderation system that applies to those standards.
Requirements for consent to assess and an outline of the moderation system that applies to this standard are outlined in the Consent and Moderation Requirements (CMR). The CMR also includes useful information about special requirements for organisations wishing to develop education and training programmes, such as minimum qualifications for tutors and assessors, and special resource requirements.
NZQA National Qualifications ServicesSSB Code 130301 / Ó New Zealand Qualifications Authority 2017 / / New Zealand Qualifications Aut