The Franchize Consultants’ April 2013 Franchising Confidence Index demonstrates a general trend towards improvement in confidence across overall sector growth drivers.
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- Franchisor sentiment for general business conditions (at net 53%) tops that indicated in recent general business forecasts, as reported in the March NZIER (23%), ANZ Business Outlook (35%) and BNZ (25%) business confidence surveys.
- Both franchisor and Service Provider forecasts for franchisor growth improved, with franchisors substantially increasing from 41% to 58%, and Service Providers from 61% to 67%.
- Franchisor sentiment for access to suitable franchisees dropped from net 5% to 0%. Conversely, Service Providers showed a large increase from net 9% to net 38%.
- This improvement in confidence was also reflected in the outlook for accessing suitable staff, with franchisors rising to a positive net 3%. Service Provider confidence also increased in this area.
- Franchisor outlook for access to suitable locations also rose from a net negative 5% to 0%. Service Providers were also positive (net 33%).
- Both franchisors and Service Providers reported improved sentiment in their outlook for access to financing. Franchisors relayed a substantial net increase of 15% to net 28%. Service Providers echoed this, rising to a net 46%.
- Franchisor expectations for franchisee sales levels rose substantially this quarter, from a net 32% to 56%.
- Franchisor confidence in operating costs remained static at net negative 11%.
- Franchisor outlook for franchisee profitability levels reached record levels this quarter, increasing from a net 13% to net 44%. Service Providers were slightly less optimistic, reducing sentiment by net 5%.
Overall, Franchize Consultants’ Franchising Confidence Index in April 2013 demonstrates much improved optimism across many key franchising growth drivers. Most notable are high and positive levels of sentiment toward franchisor growth prospects, sales levels per franchisee, general business conditions, franchisee profitability levels, and access to financing.
The author is most buoyed by franchisors’ increase in sentiment for franchisee profitability – arguably a franchise system’s most important key performance indicator. The net positive 44% reported by franchisors is the series record – and one indicator that franchising could be set to deliver growing returns to franchisees, franchisors, suppliers and the wider economy. .
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 36 franchisors and 24 service providers collected between Monday 8 and Friday 12 April 2013. Findings from both groups are reported separately. Respondents are asked whether they expect conditions to be ‘better,’ ‘same’ or ‘worse.’ ‘Net’ confidence is the difference between those reporting ‘better’ and ‘worse.’
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