Franchisors Forecast Improved Top Line. Margin Pressure Continues.
Franchize Consultants (NZ) Ltd
Media Release
KEY HIGHLIGHTS
• Franchisor sentiment consolidates for general business conditions, franchisor growth prospects and franchisees sales
levels
• Meanwhile, franchisors forecast a continuing negative/poor outlook for franchisee operating costs and profitability
levels.
• Franchisor sentiment for general business conditions tops other business confidence survey levels.
The Franchize Consultants’ October 2012 Franchising Confidence Index demonstrates a continuation of mixed results across
overall sector growth drivers.
• 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.
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 37 franchisors and 26 service providers collected between Monday
8 and Friday 12 October 2012. 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.’