Franchising Sentiment Shows Continued Optimism

Franchising Sentiment Shows Continued Optimism

KEY HIGHLIGHTS
• Responding Franchisors and Service Providers sentiment is positive and remains elevated across many key growth drivers.
• Franchisors sentiment toward general business conditions remains 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 sentiment for franchisor growth decreased from the last quarter, and sentiment for access to suitable staff and operating costs also report a negative view.

The Franchize Consultants’ April 2014 Franchising Confidence Index demonstrates a further increase in a general trend towards improved confidence across overall sector growth drivers.

• The latest results indicated positive franchisor (net 63%) and Service Provider (net 92%) sentiment toward general business conditions. These results were shared by the latest results of other more general business surveys including the BNZ (net 64% in April), ANZ Business Outlook (67% in March) and NZIER (52% in December) business confidence surveys.
• Both franchisors (net 41%) and Service Providers (net 69%) remain positive about prospects for franchisor growth. However, this is a decrease from the results in the previous quarter of net 62% and net 93%, respectively.
• Franchisors sentiment toward access to financing dropped from a positive 9% to 3%, Service Providers are more positive than franchisors at a net 38%.
• Franchisor sentiment toward access to suitable franchisees decreased slightly this quarter, from a neutral 0% to negative net 3%. Service Providers also showed less optimism than previously at a net 8%.
• Confidence in access to suitable staff decreased. Franchisor sentiment dropped from net 3% to negative net 19%. Service Providers also decreased to negative net 15%.
• Franchisor sentiment towards access to suitable locations increased from 0% to 7%. Service Providers reported a net 8%.

• Franchisor and Service Provider sentiment towards future franchisee sales levels remained at a high level. Franchisors’ at a net 65%. Service Providers up to a net 85%.
• Franchisor confidence in franchisee operating costs remained negative during this quarter at a net negative 6%. Service Provider sentiment was a net negative 46%, decreasing from negative net 40% from the last quarter.
• Franchisor sentiment toward future franchisee profitability remained positive,with Franchisors reporting a net 50%.

Overall, Franchize Consultants’ Franchising Confidence Index in April 2014 demonstrates continued positivity, though not quite as high as the record levels recorded in the previous quarter. This positive sentiment was shared by other recent general business confidence surveys.

Franchisors continue to maintain an optimistic outlook for general business conditions, sales levels per franchisee and franchisor growth prospects. We also recorded an increase in positivity for franchisee profitability, arguably a franchise system’s most important key performance indicator. However there was a general decline in the perceived availability of suitable locations and staff, and concern regarding rising operating costs.

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 13 Service Providers collected between Monday 7th April and Friday 11th April 2014. 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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