Tvnz Fair Go

TVNZ FAIR GO

(Updated – Friday 27thAugust 2010)

SURVEY OF FRANCHISE HOME BUILDING COMPANIES

During August 2010 we sent questionnaires to ten major brands. Their response are listed alphabetically, and were sent in the names of:

A1 Homes

Ross Thomas

A1 Homes 2006 Ltd

David Reid

Ben Allan
David Reid Homes Ltd

GJ Gardner

Grant Porteous

Managing Director, Deacon Holdings Ltd

NZ Master Franchisee for G.J. Gardner Homes

Golden

Shane Helms

CEO, Golden Homes

Jennian

Richard Carver

Jennian Holdings Ltd

Jennian Franchisor

Landmark

Paul Clarke

Managing Director, Landmark Homes NZ Ltd

Lockwood

Bryce Heard

Chief Executive

Lockwood Group

Platinum

Jim Martin

Platinum Homes NZ Ltd

Signature

Phillip Howe

CEO, Signature Homes Ltd

Stonewood

Bryce Wilson

National Franchise Manager

Stonewood Homes Ltd

Notes and Disclaimer

For clarity’s sake, we have referred to the master franchise or franchisor as “head office”. This term is not necessarily used by all the businesses we contacted.

Some responses have been edited for brevity.

The views expressed are not endorsed by TVNZ in any way, and TVNZ takes no responsibility for the accuracy of the information provided.

1. What liability, if any, does head office have in the case of a dispute between a
franchisee company and that company’s client?
A1 HOMES
In all cases that I`m aware of the liability will be with the Franchisee, as is normal with any Franchise Agreements, irrespective of what industry it relates to.
DAVID REID HOMES
The building contract is between the client and the franchisee building company. The
Group Office is not a party to that contract but is available to provide assistance with the
resolution of a dispute.
JENNIAN HOMES
Jennian offers a completion guarantee that is backed by all Franchisees including the Franchisor. The Jennian Franchisor will assist Franchisees to resolve disputes with (any) Clients. We also use the Master Builders dispute resolution services. Jennian Franchisees use the Registered Master Builders Federation Residential Building Contract to ensure maximum protection for our Clients and Franchisees. These contracts contain clear disputes resolution procedures.
GOLDEN HOMES
The head office stands behind each and everyone of our franchisees. At Golden Homes we restrict the number of franchisees, with only 6 covering New Zealand. Each franchisee is in regular contact with head office in relation to product and specification and general business. Each Franchisee has been part of the business for a significant period of time while being independently financially strong with significant experience, not only in building, but also with service and professionalism.
GJ GARDNER
From the outset all clients are made aware they are working with a local independently owned business, the local franchise.

• Our building contract provides penalties against the builder for non performance.
• We supply a Check List for potential customers to prompt customers to ask the right questions including financials of the builder, and our franchisee.
• We insist all clients seek independent legal advice before signing the contract.
• While we do not hold liability in law we will ensure our franchisee meets its contractual obligations to clients.

LANDMARK HOMES
Landmark Homes National Office considers they have a moral liability to their Franchisees and their clients to assist in the resolution any issues or disputes requiring their input.
LOCKWOOD GROUP
Apart from product deficiencies (which Lockwood stands behind fully) there is no legal liability, but of course there is always a responsibility toward the brand. In the Clark case the Chief Executive invited Clark and Natural Living Homes to attend a meeting to see if a solution could be found which would save both parties legal fees.
PLATINUM HOMES
Each of our Licencees are individual Limited Liability companies and contracts are between them and their clients, and that is where potential liability sits. The standard Platinum building contract has a Disputes Resolution clause in it, which sets out a clear process for resolving any dispute or difference.
Head Office will try to assist in resolving issues if requested by either party.
SIGNATURE HOMES
Legally, there is no liability; however, in 2008 we launched our own guarantee, with these guarantees issued by Signature Homes Guarantees Ltd (SHGL). Clients can claim under it, or for disputes outside of any guarantee aspect, the building agreement includes a robust dispute resolution process.
While we as the franchisor are not responsible for making good any dispute consequences outside the guarantee aspects, typically we get involved in any significant dispute to help facilitate a reasoned and practical outcome so as to avoid/minimise unnecessary costs for both parties.
STONEWOOD HOMES
There is little direct liability in such cases for the franchisor, Stonewood Homes New Zealand Limited, ("Stonewood") in such cases. However, there are a number of compelling reasons for Stonewood to make sure that all disputes between a Stonewood franchisee and its customers are handled fairly and appropriately, including:
*Stonewood is a stakeholder in each of its franchisees. The financial success of franchisees is therefore of importance to Stonewood. Stonewood recognises that this success, particularly long term success, will be determined by the strength of that franchisee's reputation in the relevant franchise territory.
*As a franchisor, Stonewood is particularly conscious of its brand and, therefore, needs to ensure that its brand is not damaged by inappropriately handled disputes with franchisee customers generally.
2. Are there any circumstances in which head office might assume liability?
A1 HOMES
To my knowledge none, other than to protect the name / integrity of the brand.
DAVID REID HOMES
In the event a franchisee has not met its obligations the Group Office has in the past
considered on a case by case basis how to provide appropriate assistance to the client.
GJ GARDNER

• Yes and we recently have willingly assumed liability to complete 18 homes for valued clients of the brand.
• Yes for instance in the circumstance where a franchisee no longer operates in the group, we consider all issues on a case by case merit basis and have resolved issues at our cost, even for subsequent owners of a property who were not a client.

GOLDEN HOMES
Golden Homes stands behind each and every home we build. We have the benefit of an exclusive Goldseal Warranty to protect the home owner so the need of head office to step in is negligible.
JENNIAN HOMES
The Jennian Franchisor will step in to resolve disputes, but I am always mindful that there is a construction contract between the Franchisee and the Client, which contains the legal rights for both parties. In some instances the Franchisor has assumed responsibility to rectify some remedial issues, as we feel a moral obligation to our Clients and the upholding of our iconic New Zealand brand. All issues are carefully considered on a case by case basis.
LANDMARK HOMES
Each Franchise is a separate business entity. The National office offers whatever support they can in resolving issues depending on the circumstances. Should a Franchisee cease to operate, the National Office would intend to complete any homes under construction.
LOCKWOOD GROUP
A situation has arisen in the past where Lockwood took over six uncompleted jobs and completed them after a franchisee went out of business. As a direct consequence of that experience Lockwood instituted compulsory Builders Guarantee Insurance for every Lockwood house built by a franchisee.
PLATINUM HOMES
Generally not in relation to a building contract, however we will always work to protect the integrity of our brand (Platinum Homes) and will review each situation as it occurs.
SIGNATURE HOMES
As set out in the guarantee provided by SHGL. SHGL provides the following guarantees;

1. Loss of deposit
2. Home completion (at no additional cost to the client)
3. Two year maintenance (non-structural defects)
4. Ten year structural and weather tightness

Essentially, what our Guarantee says is that if, for any reason, our franchisee cannot or will not finish your home, we will finish it for you at no additional cost to the Building Agreement. Our Home Completion Guarantee has been specifically set up to protect the consumer knowing that the recession was potentially going to take its toll. This initiative is exclusive to Signature Homes and is reflective on our focus on customer protection.
STONEWOOD HOMES
Stonewood has a security interest in the building agreements of its franchisees so that if any franchisee becomes insolvent, Stonewood has the ability to take over and complete the franchisee's obligations under those building agreements. In addition, Stonewood may step in where an issue under the Consumer Guarantees Act 1993 or the Fair Trading Act 1986 arises to protect the Stonewood brand.
3. In the case of a dispute, what assistance (if any) does head office offer to the client
and/or the franchisee company?
A1 HOMES
When assistance is sought by either party, generally Head Office would recommend the appropriate course of action, be it meditation between parties or obtaining legal advice to resolve the dispute.
DAVID REID HOMES
The Franchisor will if requested provide advice to either party to assist with a resolution.
This can include:
- Discussions with both parties to establish grounds for the dispute and facilitate a
resolution
- A site visit by a Group Office representative to identify the extent of the issue.
- Engage the services of Master Builders to provide independent advice on the issue.
GJ GARDNER

• Yes we will provide full assistance as an absolute a priority. While disputes are not common, having built over 7000 homes in 13 years they can occur.
• If a dispute arrives at any time it becomes a head office priority to understand the dispute and work with both the franchisee and customer until resolved. If necessary as the Managing Director for the group I will assist.
• Our franchise team are very good at resolving issues however house building can be an emotional journey (for some) so we will mediate if the customer wishes, direct the franchisee if needed and assist both the client and franchisee to agreed outcomes

GOLDEN HOMES
Head office will always assist with dispute resolution. We have easy to follow alternative dispute resolution procedures in our contract to allow for the expedient and cost effective means of resolving any issue should one arise.
JENNIAN HOMES
We offer full support to the Franchisee and the Client. This is often quite complicated as there is a signed construction contract with rights for both parties to pursue in the case of a dispute. Please also remember, that it is not always the builder that is at fault. The Franchisor involvement is often to ensure fair play and the upholding of standards, and to that end we look to support a timely and mutually acceptable resolution to disputes.
LANDMARK HOMES
If an issue cannot be resolved between the Client and the Franchisee then Head Office would assist in resolving the issue.
LOCKWOOD GROUP
Lockwood would encourage the parties to use the correct channels (Mediation/Litigation – as required under their contract) for a serious dispute.
PLATINUM HOMES
We will assist in disputes between individual licencees and their clients when requested. We try and take an impartial view and most issues are sorted out at that level. We also insure every contract (on behalf of the Client) through an external Guarantee company, Builtin New Zealand Ltd (on behalf of Contractors Bonding). They are the only Guarantee Company in NZ to have a Claims Paying Rating. The clients have recourse directly with Builtin, who in turn will rule on each situation. This covers any contractual agreement during construction through to guaranteed completion, and provides a Seven Year (transferable) Guarantee on handover.
SIGNATURE HOMES
For guarantee issues, SHGL will step and deal with the issue for the client if the franchisee does not adequately do so, and for other disputes, we act as a facilitator to help resolve disputes.
STONEWOOD HOMES
Stonewood would offer full assistance to either party if requested. In the course of Stonewood's 23 year history (involving the construction of over 3,500 homes) Stonewood has always resolved matters satisfactorily before they have escalated as far as the District Court. Stonewood therefore has considerable expertise in this area and is well placed to assist.
4. When selecting your franchisee companies, what steps do you take to ensure
sufficient skills and/or qualifications?
A1 HOMES
As with an employment process, we do the upmost to ensure the person / persons are suitable for the business, we ensure they are capitalized and capable of running their own business, we have a National Franchisee Support person, whole role it to ensure all Franchisees adhere to Policies and or Standards Of Operation at all times.
DAVID REID HOMES
Prior to selecting a franchisee we:
- Carry out site visits
- Have a number of meetings to determine if the individual has appropriate skills
and competencies
- Give consideration to their experience and qualifications
- Work with the franchisee to develop their business plan
- Contact referees
GJ GARDNER
It often has being commented it’s hard to become a GJ franchisee, and every bit as hard to keep it. We do decline many applications.

• Often we select or are approached by individuals that we have known in business and have dealt with for and extensive time, experiencing their professionalism, integrity, knowledge first hand.
• They must be able to demonstrate a successful record that requires a range of skills.
• We complete a range of testing including interviews (including external parties), profiling, extensive reference and character searches, and we require full financial disclosure

GOLDEN HOMES
See (3) above
JENNIAN HOMES
Jennian has a comprehensive Franchisee selection criteria, which includes assessing the skills and qualifications of potential Franchisees. Not only do we look for financial strength, but the appropriate mix of skill and experience to be a business operator. We have turned down potential Franchisees in the past because they do not meet all of our strict criteria. It is important that our Franchisees have the ability to run great back office systems and processes to support the building of our Clients’ dream homes.
Jennian Homes also operates a national support office providing accounting, draughting and estimating services to our Franchisees, ensuring national standards and maximum support of our Franchisees.
LANDMARK HOMES
An in-depth qualification process is undertaken when recruiting new Franchisees including multiple interviews and thorough due diligence by the Franchisor. If the Franchisee is not a qualified builder they are required to employ a qualified and experienced person to oversee the construction process.
LOCKWOOD GROUP
A full screening, training and induction process is used. Ongoing technical and business training is provided.
PLATINUM HOMES
We have strict criteria as to the requirements of Licencees. These include financial position, business skills, building and trade skills and integrity along with other qualifications. We have sixteen Licensed areas in NZ.
SIGNATURE HOMES
We have developed a robust and comprehensive selection process which includes multiple interviews with our senior team members, thorough reference checking of at least 5 former employers/colleagues/associates, and financial audits, which we then support with a robust and comprehensive induction and training programme for new franchisees.
We monitor key performance indicators on an ongoing basis, and provide training and resources for effective dispute resolution.
STONEWOOD HOMES
Stonewood requires that all of its franchisees be operated by registered master builders.
In addition, when doing due diligence on a potential franchisee, Stonewood's key criterium is that the franchisee is a successful operator with a proven track record.
Stonewood also oversees franchisees' auditing processes and ongoing training.
Stonewood believes that a franchisee should be fully trade qualified and prepared to learn and use Stonewood's systems. In Stonewood's experience, building company failures usually arise from financial mismanagement and that is why Stonewood carries out a full back office function for its franchisees.
5. What warranty does your company offer?
A1 HOMES
As member s of The Master Builders Federation of New Zealand, we offer a New Home Warranty of between 7 -10 years to suit the client. At A1 Homes NZ, all Franchisees are on a 14 day payment schedule to Suppliers, which is strictly monitored by us and adhered to by all, this also significantly reduces the potential for failure.
DAVID REID
Franchisees of David Reid Homes are able to offer clients a combination of Performance
Guarantee’s including:
Loss of Deposit and Non-completion Guarantee
- The David Reid Homes Guarantee covers loss of deposit up to 10% of the
contract price and non-completion of the build.
Defects Guarantee
- In the event that a defect is identified in a clients home relating to workmanship,
materials or structural elements there is cover provided by either the Master Build
Guarantee, or the Homefirst Builders Guarantee.
GJ GARDNER

• Firstly we start with product selection. Suppliers must have a demonstrated history to stand by all the product warranties they provide and that exceed the NZ Building code.
• Our franchisees ensure they meet all obligations they hold under the building code for 10 years.
• Each franchise is required to carry a range of Insurances, including Public Liability and Construction Cover while the home is being built. We audit this.
• Additionally each home has insurance by an independent party for Loss of Deposit, Completion Insurance and Cover for defects, workmanship and structural performance. These polices are owned by the home owner. Again we audit these are provided.

GOLDEN HOMES
See (3) above
JENNIAN HOMES
Jennian offers a completion guarantee backed by all Franchisees and the Franchisor. In almost 30 years of building homes for New Zealanders, we have never failed to complete a home and the Jennian Franchisor and our national network of Franchisees stand behind this record. We also offer an industry leading 365 day maintenance warranty (see our website for details). The Jennian completion guarantee is backed by the Master Builders, Master Build Guarantee. The Jennian Franchisor will also complete the Jennian Client construction contract, should a Franchisee fail to do so