Franchising Sentiment Remains Elevated

Franchising Sentiment Remains Elevated

Franchize Consultants (NZ) Ltd
Media Release

KEY HIGHLIGHTS

• Franchisor sentiment very positive, and remain elevated, this quarter across a range of important franchise sector growth drivers.

• Franchisors sentiment toward general business conditions is high and comparable to other general business confidence surveys (i.e. ANZ, BNZ and NZIER).

• Franchisors remain positive, on balance, about franchisee profitability prospects – arguably franchising’s most important key performance indicator.

• Generally, both franchisors and service providers noting improved sales conditions.

The Franchize Consultants’ July 2013 Franchising Confidence Index demonstrates a general trend towards improvement in confidence across overall sector growth drivers.

• The latest results indicated highly positive franchisor (net 50%) and Service Provider (net 67%) sentiment toward general business conditions. These elevated results were shared by the latest results of other more general business surveys including the BNZ (net 59% in July), ANZ Business Outlook (53% in July) and NZIER (31% in June) business confidence surveys.

• Both franchisors (net 53%) and Service Providers (net 67%) were positive about prospects for franchisor growth. Only three of 32 franchisor respondents expected franchisor growth prospects to deteriorate.

• Both franchisors and Service Providers remain positive in their outlook for access to financing, on balance, albeit Service Providers (net 27%) are more positive than franchisors (net 9%).

• Franchisor sentiment toward access to suitable franchisees improved this quarter, from net 0% to 9%. Service Providers, meanwhile, were more optimistic at a net 33%.

• Confidence in access to suitable staff remained largely neutral, but positive and improving, on balance. Franchisor sentiment remained at a net 3%. Service Providers also increased in confidence (net 27%).

• Franchisor sentiment towards access to suitable locations also rose from net 0% to 13%. Service Providers were more positive (albeit decreasingly so) at net 20%.

• Franchisor and Service Provider sentiment towards franchisee sales levels both show some consolidation at a high level, overall. Franchisors’ settle at a net 53%. Service Providers improve to a high net 60%.

• Franchisor confidence in operating costs remained static, but negative, during this quarter at a net negative 16%. Correspondingly, Service Provider sentiment was a net negative 20%.

• Sentiment toward future franchisee profitability remained positive overall. Franchisors reported a decrease from a positive net 44% to 28%. By contrast Service Providers demonstrated greater confidence, increasing from a net 25% to 53% - the strongest sentiment Service Providers have reported toward forward franchisee profitability levels.

Overall, Franchize Consultants’ Franchising Confidence Index in July 2013 demonstrates continued high levels of sentiment across many key franchising growth drivers. Most notable were high and positive levels of sentiment toward franchisor growth prospects, sales levels per franchisee, general business conditions, and franchisee profitability levels.

We continue to be encouraged by positive sentiment toward franchisee profitability – arguably a franchise system’s most important key performance indicator. Similarly, high levels of sentiment and more positive comments relating to sales growth point to an improved outlook for franchisors and franchisees alike.

For a copy of the full report visit: www.franchisingconfidence.co.nz

Franchising Confidence Index Background

Franchize Consultants’ Franchising Confidence Index is a quarterly survey of circa 400 New Zealand franchisors and 100 specialist service providers (e.g., consultants, banks, accountants, lawyers and publishers) to the franchising community.

The Franchising Confidence Index represents confidence in key measures critical to the success of franchising in this country by reporting attitudes toward general business conditions, as well as key franchising growth determinants including access to capital, suitable potential franchisees, staff and locations. The Franchising Confidence Index also covers franchising health attributes and outcomes by exploring franchisee sales, operating costs and profitability, and franchise system growth prospects.

The data and analysis presented represents the views of 32 franchisors and 16 Service Providers collected between Monday 22 and Wednesday 31 July 2013. Findings from both groups are reported separately. Respondents were asked whether they expected conditions to be ‘better,’ ‘same’ or ‘worse.’ ‘Net’ confidence is the difference between those reporting ‘better’ and ‘worse.’

ENDS

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