Signature Homes tightens processes

Collapsed Signature Homes franchises around New Zealand have left more than 450 unsecured business creditors out of pocket by more than $4.5 million during the past five years. Otago Daily Times Business Reporter Simon Hartley asks the parent of the franchised companies, Signature Homes Ltd and its managing director Gavin Hunt, about its business model for franchisees.

•  New owners sign off 16 contracts

Ten construction companies associated with parent franchise owners Signature Homes, David Reid Homes and Landmark Homes have collapsed during the past five years, owing millions of dollars to unsecured creditors.

Signature Homes has been operating for 28 years and expects to build houses valued at more than $100 million this year, but in Otago, Signature Homes franchise collapses have occurred twice during the past five years, owing in total more than $2.3 million.

Two more franchises have gone under in Wellington.

The parent company says it has since tightened its franchise processes, invested in management technology and overseen the completion of 16 Otago and Southland homes which were contracted to Dunedin-based Murwil Construction at the time of its liquidation, under a new Home Completion Guarantee offered by Signature.

Last week, Jennian Homes Otago Ltd became the latest franchise-builder casualty, having got into financial difficulty amassing $581,731 of debt amid plummeting sales earlier in the financial year.

The issue prompted Jennian's owner to offer to put more than $100,000 of borrowed money into the company, if the 93 creditors would accept payment of 20c in the $1, which would keep the company trading.

For dozens of Signature Homes' clients and hundreds of business owners, the past five years have been fraught, with the four Signature franchisees in two areas getting into financial difficulties, owing millions of dollars to tradesmen and businesses.

Tauranga-based Gavin Hunt is managing director of Signature Homes Ltd, the parent company of the franchised businesses, does not believe the business model for franchisees is flawed.

In the wake of the franchisee problems, the parent's Support Office resources to franchise holders had been doubled.

"Several hundreds of thousands of dollars" had been spent on a business management system, and accountancy firm Deloitte audited Signature quarterly, including its franchise management, Mr Hunt said.

"The principal conclusion from this audit was that our systems and processes were essentially very sound, but we had to ensure they were strictly followed by our franchisees."

The primary problem of Signature franchisees was their failure to follow processes and systems, weak leadership at the franchise level allowing "the wrong influences to prevail" and fraudulent activity of a franchisee, as was the case of one Signature franchises holder, Mr Hunt claimed.