Franchising Research: Franchising Sentiment Metrics Remain Positive
Franchize Consultants (NZ) Ltd
Franchising Research Highlights
- Franchisors and Service Providers sentiment continues to provide an optimistic outlook specifically across the areas of franchisee sales levels, franchisee profitability and franchisor growth prospects, and notably increased confidence in relation to access to finance.
- Franchisors sentiment toward general business conditions was substantially more positive this quarter for franchisors, with Service Providers more subdued.
- Franchisors sentiment about franchisee sales and franchisee profit levels saw increased confidence in both areas.
- Franchisor and Service Provider sentiments for franchisor growth prospects continued to show positive increases.
The Franchize Consultants’ October 2016 Franchising Research Franchising Confidence Index demonstrates a continued optimistic outlook across several sector growth drivers.
- The latest results indicated a substantially more positive franchisor (net 40%) sentiment toward general business conditions. These results were higher than the latest results of other more general business surveys including the ANZ Business Outlook (net 28% in September) and NZIER (net 26% in October) business confidence surveys.
- Franchisors (net 57%) showed momentum gain about prospects for franchisor growth. These results are up from the net 46% in the previous quarter.
- Franchisors sentiment toward access to financing bounced back from a net 0% to net 15%. Service Providers reported a net 0%, up from negative net 5%.
- Franchisor sentiment toward access to suitable franchisees was more subdued this quarter, up from a net 11% to a net 12%. Service Providers, meanwhile, were far more positive with a net 16% increase to a net 21%.
- Franchisor sentiment towards access to suitable locations showed ongoing fluctuations decreasing from net 6% to net negative 13%. Service Providers on the other hand increased to net 26%, up from net 5% in July.
- Franchisor sentiment towards future franchisee sales levels showed continued positive increases up to a net 63%, from net 51% in July. Service Providers featured a more reserved increase from a net 30% to a net 42%.
- Franchisor confidence in franchisee operating costs improved slightly this quarter to a net 0%. Service Provider sentiment was reflected with a drop from net 5% to a net negative 11%
- Sentiment toward future franchisee profitability continues to fluctuate up and down between Franchisor and Service Providers. Franchisors reported an increase to net 49%, with Service Providers showing a decrease to net 21%.
Summary & Implications
Franchize Consultants’ Franchising Confidence Index Franchising Research in October 2016 continues to demonstrate a generally positive outlook overall.
Many of the measures, which softened last quarter have seen some confidence regained, specifically, franchisors outlook for general business conditions, franchisee sales, franchisee profitability, and franchisor growth prospects.
Perhaps most notable are strong Franchisor sentiment for franchisee sales and profit improvements, backed by comments demonstrating strong sales growth in existing sites.
Combined, these views are clearly positive. However assessments locally and internationally indicate potential future economic storm clouds (originating mainly internationally) that could easily, in turn, impact local trading. Aligned, it is Franchize Consultants view that now, particularly when there is some buoyancy, is a time to evaluate franchise system structure and performance for future.
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 35 franchisors and 19 Service Providers collected between Tuesday 11 October and Monday 17 October 2016. 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.’