NEW ZEALAND FRANCHISORS ENTER 2013 CAUTIOUSLY OPTIMISTIC.

Franchize Consultants’ January 2013 Franchising Confidence Index demonstrates a continuation of mixed results across overall sector growth drivers, but with a slight increase in confidence from the October 2012 issue.
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Key Highlights

• Franchisor sentiment most positive for prospects for growth, general business conditions, and franchisee sales levels.
   
• Meanwhile, franchisors forecast a negative/poor outlook for franchisee operating costs, availability of staff and franchisees.
   
• Franchisor sentiment for general business conditions equalled or topped other recent business confidence survey levels.

• 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 37%, compared to 28% in October. Service Provider sentiment showed a more marked improvement from net 42% to net 66%.
   
• Both franchisor and Service Provider forecasts for growth improved, with franchisors increasing from 28% to 41%, and Service Providers from 38% to 61%.
   
• Franchisor sentiment for access to suitable franchisees dropped from net 14% to 5%. Service Providers showed an even larger decrease of net 28%, from 35% to 9%.
   
• This reduction in confidence was also reflected in the outlook for accessing suitable staff, with franchisors dropping negative net 5%. Service Provider confidence also dropped in this area.
   
• Franchisor outlook for access to suitable locations took a substantial tumble from a net 23% to negative 5%. Service Providers were more positive (net 31%).
   
• Both franchisors and Service Providers remain positive in their outlook for access to financing, albeit Service Providers (net 26%) are more positive than franchisors (net 13%).
   
• Franchisor expectations for franchisee sales levels (net 32%) and operating costs (negative net 11%) demonstrated positive improvements compared to the previous quarter.
   
• Franchisor outlook for franchisee profitability levels also improved from a net negative 3%, to a positive 13%. Service Providers were also more optimistic in their forecasts for franchisee profit generally, increasing from a net 0% (October 2012) to 30%

Greatest Challenge to Franchising Development in 2013

Franchisors were asked what they perceived to be the greatest challenge to franchising development in the year ahead.

Finding franchisees or [more specifically] ‘suitable’ franchisees continued as franchisors’ top challenge to franchising development, mentioned 13 times this survey.

The second most identified and telling challenge identified by franchisors’ in 2013 related to their respective franchisees or unit-level business model.

Franchising Confidence Index

The Franchising Confidence Index represents the views and expectations of franchising, an important domain of business within the New Zealand economy.

Franchising is a substantial and growing domain of business making up an important part of the New Zealand economy. The Franchising New Zealand 2012 survey, conducted by Massey University in collaboration with Griffith Business School, indicates New Zealand has 446 individual franchise systems comprising some 22,400 units (owned mostly by franchisees). The survey also suggests local franchise systems employ some 100,000 people. Finally, local expert estimates of total franchise system turnover range from $15 to $25 billion – suggesting franchising is a strong contributor to New Zealand GDP – as it is around the world. Companies involved in franchising are as diverse as Foodstuffs (New World, PAK'nSAVE, Four Square), NZ Post, Fisher & Paykel, Contact Energy, McDonald’s, Columbus Coffee, Fastway Couriers, Harcourts and Fletcher Building.

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 38 franchisors and 23 Service Providers collected between Monday 21 and Friday 25 January 2013. 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.’