View a copy of the full April 2017 Franchize Consultants Franchising Confidence Report
- Responding Franchisors and Service Providers demonstrate a positive outlook overall in the areas of general business conditions, franchisor growth and franchisee profitability.
- Concerns emerge for key growth enablers, including access to finance, access to suitable franchisees and availability of suitable staff.
- Whilst the numbers show a decline, both franchisors and service provider comments remain quietly positive.
The Franchize Consultants’ April 2017 Franchising Confidence Index demonstrates a positive outlook overall on many key areas of sentiment.
- The latest results indicated a decline in outlook for general business conditions, at net 18%. These results were in line with other research involving general business surveys including the ANZ Business Outlook (net 11% in March) and NZIER (net 13% in April).
- Franchisors (net 48%) sentiment for franchisor growth, remains strong, albeit dipping from net 59% in the previous quarter. Service Providers also remain strong at net 41%. Down slightly from net 47% last quarter.
- Franchisor and Service Provider sentiment toward access to financing appears to be tightening with franchisors dropping from net negative 8% to net negative 15%. Service Providers dropped in net sentiment from a positive net 18% to 0% this quarter.
- Franchisor sentiment toward access to suitable franchisees saw a drop from net 10% to net negative 10%. Service Providers, who last quarter were very positive at net 41% dropping to net 24% this quarter.
- Franchisor sentiment towards access to suitable locations often provides quite a fluctuating picture however this quarter remained relatively stable with franchisors showing a net 17%, up from net 16%. Service Providers sentiment was slightly more sombre down from net 12% to net 6%.
- Franchisors sentiment toward the availability of suitable staff hit the lowest point seen during the time of this research at net negative 26%, down from net negative 3%. Service Providers were, in comparison, more positive than last quarter up 6% to a net 0%.
- Franchisor sentiment towards future franchisee sales levels decreased from a net 56% to net 49%. Service Providers, were slightly less positive than Franchisors showing a decrease from a net 53% to a net 41%.
- Franchisor confidence in franchisee operating costs this quarter increased from net negative 13% to net 0%, whereas Service Providers sentiment has taken a large dip decreasing from net 0% to a net negative 29%.
- Sentiment toward future franchisee profitability levels remained quite stable for Franchisors down from a net 44% in January to a net 40% in April. Service Providers sentiment by contrast dipped substantially from a net 35% to a net 0%.
Summary & Implications
Franchize Consultants’ April 2017 Franchising Confidence Index demonstrates a positive outlook overall on many key areas of sentiment. Sentiment toward franchisor growth and franchisee remain very positive overall, albeit slightly reduced compared to the previous quarter. Sentiment toward general business conditions also remain in good positive territory, albeit also reduced.
Meanwhile, however, concerns emerge for key growth enablers, including access to finance, access to suitable franchisees and availability of suitable staff.
Sentiment toward access to finance has reduced and this is a concern for the franchise community. Some banks do appear to be reducing their marketing focus on franchising, and banks generally are becoming more selective (often for good reason) in their lending decisions.
Also noteworthy is the reduction and record low level of sentiment toward the availability of suitable staff. This again is of concern because it reduces the ability of both franchisees and franchisors to take advantage of demand potential.
Overall, there is a positive based of sentiment toward the future. However, there are concerns in some areas and there is some concern the economic future is becoming less certain. Aligned, as is commonly our view, Franchize Consultants view is that now, particularly when there is some buoyancy, is a time to evaluate franchise system structure and performance for future improvement needs and opportunities.
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 40 franchisors and 17 Service Providers collected between Monday 3 April and Friday 7 April 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.’