Franchisors Cautious of Economic Environment

KEY HIGHLIGHTS

• Franchisors and Service Providers demonstrate a strong shift in confidence levels, with changes prevalent in sentiment toward general business conditions and growth prospects
• Availability of suitable staff along with suitable locations showed increased sentiment. Previously these were viewed as key challenge areas.
• Franchisor sentiment towards franchisee sales levels dipped, although remains strong.

Click here for a copy of the full October 2017 Franchising Confidence Index Report

The Franchize Consultants’ October 2017 Franchising Confidence Index demonstrates a challenged outlook across several sector growth drivers.

• • • The Franchisor net 3% positivity in outlook for general business conditions was reduced but in line with that of other research involving general business. The ANZ Business Outlook decreased to a net 0% in September (down from 43% in June) and NZIER business survey also decreased significantly from 18% in July to a net 7% in October.
    • Franchisor sentiment toward access to suitable franchisees increased markedly in July, at net 13% and dipped back in October to a net negative 20%. Service Providers were of similar sentiment dropping from net 36% to net 7%.
    • Franchisors sentiment toward the availability of suitable staff recovered from a record low at a net negative 32%, to bounce back to net negative 14%. Service Providers were equally positive at a net 7%, up from net negative 7% in July.
    • Franchisors sentiment this quarter with sourcing suitable locations, bounced back from a July dip of net negative 5% to net 11%. Service Providers outlook remained stable at net 20%.
    • Franchisor sentiment toward franchisee operating costs remains a challenge declining from a net negative 15% to a net negative 21%. Service Provider outlook remained more negative at a net 27%, down on July’s net negative 21%
    • Franchisor sentiment toward franchisee sales levels dipped slightly although remains strong at a net 43%. Service Providers were less optimistic, dropping to net 13% from net 43%.
    • Franchisors sentiment towards franchisee profitability which is a strong indicator of the economic climate dipped for the second quarter in a row from net 18%, to net 7%. Service Providers were strongly in agreeance at a net negative 7%; a drop of 36%.
    • Franchisor sentiment toward access to financing remains a challenge, slightly less positive at net negative 13% down from negative 8%. Service providers sentiment on the other hand was slightly elevated to net negative 7%, up from negative 21%.

Summary & Implications

Franchize Consultants’ Franchising Confidence Index in October 2017 shows the impact of local and worldwide uncertainties, with caution being exercised. Additionally, both franchisors and service providers make note of declining demand, in some sectors. And franchisors, in particular, make many references to increased investment and operating costs, as well as competitive, compliance, franchisee recruitment and financing pressures.

Particular note is given to uncertainty associated with the domestic election. Accordingly, we reference indicators during previous election years (notable 2011, and to a lesser degree, 2014) that saw similar dips in general business confidence. These proved temporary, with rapid gains in following quarters.

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, access to capital, legislation, and as is currently seen; the government.

For a copy of the full report visit: www.franchisingconfidence.co.nz

Oops! We could not locate your form.