Franchising Sentiment Mostly Positive

Franchize Consultants (NZ) Ltd

Media Release

Franchising Sentiment Mostly Positive

KEY HIGHLIGHTS

• Responding Franchisors sentiment is still positive and remains elevated across many key growth drivers, however Service Providers were less positive generally and markedly in some areas.

• Franchisors sentiment toward general business conditions tops other general business confidence surveys (i.e. ANZ and NZIER).

• Franchisors remain positive about franchisee profitability levels – arguably franchising’s most important key performance indicator.

• Franchisors sentiment for franchisor growth increased from the last quarter.

The Franchize Consultants’ July 2014 Franchising Confidence Index demonstrates mixed results from reporting Franchisors and Service Providers.

• The latest results indicated positive franchisor (net 53%) toward general business conditions. Service Provider (net 27%) sentiment was less positive, and was reflective of other general business surveys including ANZ Business Outlook (40% in July) and NZIER (32% in June) business confidence surveys.

• Franchisors (net 63%) remain positive about prospects for franchisor growth. However, Service Providers have reported a decrease in results from 69% in the previous quarter to 27% this quarter.

• Franchisors sentiment toward access to financing increased slightly from 3% to 13%, Service Providers are slightly less positive than franchisors at a net 7%.

• Franchisor sentiment toward access to suitable franchisees increased this quarter, from negative net 3% to 17%. Service Providers also showed more optimism than previously at a net 47%.

• Confidence in access to suitable staff increased. Franchisors sentiment increased slightly from negative net 19% to negative net 7%, and Service Providers matched this also reporting a negative net 7%.

• Franchisor sentiment towards access to suitable locations decreased from 7% to negative net 8%. Service Providers reported a net 7%.

• Franchisor sentiment towards future franchisee sales levels remained at an elevated level at a net 70%. Service Providers dropped from 85% last quarter to net 40% this quarter.

• Franchisor confidence in franchisee operating costs increased this quarter to net 13%. from a negative net 6% last quarter. Service Provider sentiment was a negative net 33%.

• Franchisor sentiment toward future franchisee profitability remained positive, with Franchisors reporting a net 53%.

Overall, Franchize Consultants’ Franchising Confidence Index in July 2014 demonstrated mixed results from reporting Franchisees and Service Providers. The subdued sentiment from Service Providers is shared by other recent general business surveys.

Franchisors continue to maintain an optimistic outlook for general business conditions, sales levels per franchisee and franchisor growth prospects. We were also encouraged to record a slight increase in positivity for franchisee profitability, arguably a franchise system’s most important key performance indicator. In contrast, however, it is interesting to note a decline in the perceived availability of suitable locations and staff as other dimensions recover.

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 30 franchisors and 15 Service Providers collected between Monday 28th July and Friday 1st August 2014. 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.’