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Franchisors Forecast Improved Top Line. Margin Pressure Continues

October 17, 2012 by Callum Floyd

The Franchize Consultants’ October 2012 Franchising Confidence Index demonstrates a continuation of mixed results across overall sector growth drivers. You can view the following SlideShare presentation and highlights, or click here for a full copy of the report.

  • The latest results indicate a consolidation in franchisor and service provider (views for franchisors generally) forecasts for general business conditions. Franchisor responses improved to a net 28%, compared to 22% in July. Similarly, service provider sentiment improved to 42% (current) from 34%.
  • Franchisor sentiment toward their own growth prospects declined from a net positive 54% (in July) to 28%. By contrast, service provider sentiment toward the same increased from 20% (in July) to 38%, regaining some ground from the relative highs reported in April.
  • Both franchisor and service provider sentiment toward access to suitable franchisees showed an increase from July. Franchisors seem to be slightly more cautious, however, with only a slight increase from a net 7% to 14%. The increase in service provider opinion was a lot more marked, from net 4% to 35% (a substantial 31% gain from the last survey).
  • Service providers’ higher confidence levels continued toward accessing suitable staff with an increase of net 22%, but were not shared by franchisors who displayed a loss of confidence with a drop from net 12% to 6%.
  • There was a notable increase in confidence from both groups of respondents towards perceived access to suitable locations. Franchisors, however, were again more reserved with a small net 2% increase, compared to service providers’ 21% net gain since July. The two groups ultimately displayed similar levels of confidence despite these differences, at net 23% and 27% respectively.
  • In relation to access to funding, franchisors appear to have kept relatively stable levels of confidence since July, with only a small drop of net 1% to 14% this quarter. Service providers, on the other hand, have become a lot more optimistic towards franchise funding with a considerable net 35% increase.
  • Franchisor sentiment toward sales decreased further this quarter, from a net 34% to 22%. Service providers echoed this downward trend at a net 19%.
  • Both franchisors and service providers continue to forecast stormy waters for franchisee operating costs, ending at a net negative 17% and 23%, respectively.
  • Not surprisingly, overall sentiment toward future franchisee profitability levels also declined. Franchisors forecast a net negative 3%. Service providers forecast a net 0%. Both groups are clearly concerned.

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Category: Blog

About Callum Floyd

Our Managing Director, Dr Callum Floyd, served on the FANZ board in various roles for nearly a decade, and Franchize Consultants continues its long-term support of FANZ in any way it can. We’re strong believers in the value of FANZ’s firm codes of practice and ethics, and for this reason recommend our franchisor businesses consider FANZ membership.

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