Strong Franchisee Sales Outlook Continues

KEY HIGHLIGHTS

• Franchisors and Service Providers demonstrate a continued increase in confidence levels across many areas, particularly, general business conditions, franchisee sales levels, and franchisor growth prospects.
• Both Franchisors and Service Providers were positive in their outlook for general business conditions.
• Availability of suitable staff were a standout challenge, and positivity toward franchisee profitability levels diminished.
• Franchisor sentiment for franchisor growth prospects continues to remain stable. Service Providers perceptions showed a slight increase.
• Franchisor and Service Provider sentiment toward access to suitable franchisees increased markedly

The Franchize Consultants’ July 2017 Franchising Confidence Index demonstrates a continued stable outlook across several sector growth drivers.

• The Franchisor net 26% positivity in outlook for general business conditions was still higher than that of other research involving general business. The ANZ Business Outlook increased to a net 24.8% in June (up from 14.8% in May) and NZIER business survey also increased slightly up from 16% in April to a net 18% in July.
• Franchisor sentiment toward access to suitable franchisees increased markedly from a net negative 10% to a positive net 13%. Service Providers were equally positive with an increase to net 36%, up from 24%.
• Franchisors sentiment toward the availability of suitable staff hit a record low at a net negative 32%, down from a net negative 26%. Service Providers were moderately more positive at a net negative 7%, down from a slightly more positive net 0% in April.
• Franchisors sentiment this quarter indicated there are further challenges with sourcing suitable locations, dipping from a positive net 17% to a net negative 5%. Service Providers outlook was quite the opposite increasing to a net 21% up from a net 6%
• Franchisor sentiment toward franchisee operating costs declined from a net 0% to a net negative 15%. Service Provider outlook remained more negative at a net negative 21% – albeit slightly improved from April (net negative 29%).
• Both Franchisor and Service Provider sentiment toward franchisee sales levels remained strong at a net 51% and 43%, respectively.
• Franchisors sentiment towards franchisee profitability levels took a dip to still positive net 18%, down from an April net 40%. Conversely, Service Providers were more positive at a positive net 29%, up from 0% in April.
• Franchisor and Service Provider sentiment toward access to financing differed, with franchisors more positive at a net negative 8%, improved from a negative 18%. Service providers sentiment deteriorated from a net 0% to a negative 21%.

Summary & Implications

Franchize Consultants’ Franchising Confidence Index in July 2017 continues to demonstrate a generally positive outlook overall.

The outlook for franchisee sales continues to remain strong, as do franchisor growth prospects and franchisor sentiment toward general business conditions. Meanwhile, however, the results and commentary continue to highlight an increasing constraint to growing businesses; namely, the ability to access suitable staff. We note this pattern in many industries, particularly hospitality. Access to suitable locations and financing are also areas of potential challenge.

Importantly, overall, franchisor remain positive about franchisee future sales levels. And whilst there are concerns around franchisee operating costs franchisors on balance are still net positive about future franchisee profitability levels.

Increasingly, as indicated in the wider business press for business generally, franchisors need to take an active role in adapting and future-proofing their franchise systems – in an environment with many forces of change, like employment, technology, competition, the economy and access to capital.

For a copy of the full report: www.franchisingconfidence.co.nz or www.slideshare.net/franchizeconsultants

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 39 franchisors and 14 Service Providers collected between Monday 26 June and Friday 30 June 2017.  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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