Franchisors Continue Positive Outlook

Franchisors Continue Positive Outlook

Franchize Consultants (NZ) Ltd
Media Release

KEY HIGHLIGHTS

• Responding Franchisors and Service Providers reported mostly solid optimism across many key 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 about franchisee profitability levels – arguably franchising’s most important key performance indicator.

• Franchisors were equivocal on access to financing, and on balance hold a negative view on the availability of suitable staff and franchisee operating costs.

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

• The latest results indicated positive franchisor (net 41%) and Service Provider (net 50%) sentiment toward general business conditions – albeit slightly less so than the previous quarter. These results were shared by the latest results of other more general business surveys including the BNZ (net 59% in August), ANZ Business Outlook (54% in September) and NZIER (32% in October) business confidence surveys.

• Both franchisors (net 50%) and Service Providers (net 79%) were positive about prospects for franchisor growth. Service Providers remained more positive than franchisors, further building upon their already positive sentiment in the previous quarter (67%).

• Franchisors sentiment toward access to financing dropped from a positive 9% to 0%, Service Providers are more positive than franchisors at a net 14%.

• Franchisor sentiment toward access to suitable franchisees deteriorated this quarter, to a notable negative net 13%, from a positive 9% the previous quarter. Service Providers, meanwhile, were more optimistic at a net 29%.

• Confidence in access to suitable staff improved slightly. Franchisor sentiment grew from 3% to 9%. Service Providers also increased from net 27% to 29%.

• Franchisor sentiment towards access to suitable locations rose from net 13% to 19%. Service Providers were less positive at net 14%.

• Franchisor and Service Provider sentiment towards future franchisee sales levels remained at a high level. Franchisors’ at a net 53%. Service Providers a net 50%, though this is down from 60% in the last quarter.

• Franchisor confidence in franchisee operating costs remained negative during this quarter at a net negative 16%. Service Provider sentiment was a net negative 7%, slightly elevated from the last quarter.

• Sentiment toward future franchisee profitability remained positive overall. Franchisors reported a net 19%, and Service Providers a net 36%.

Overall, Franchize Consultants’ Franchising Confidence Index in October 2013 demonstrated a continuation of the generally high levels of sentiment recorded in the previous quarter. This elevated sentiment is shared by other recent general business confidence surveys and is reflective of a generally improved outlook and forecast for the economy.

We were encouraged to record a continued and positive outlook for franchisee profitability. By contrast, franchisors on balance held a negative view on the availability of suitable staff and operating costs per franchisee. Franchisors were equivocal on access to financing.

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 14 Service Providers collected between Monday 14th October and Friday 18th October 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.’

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