NEW ZEALAND FRANCHISORS REPORT INCREASED CONFIDENCE IN 2015

KEY HIGHLIGHTS

• Responding Franchisors and Service Providers sentiment demonstrates improved optimism across many key growth drivers
   
• Fanchisors sentiment toward general business conditions is high
   
• Franchisors remain positive about franchisee profitability levels – arguably franchising’s most important key performance indicator
   
• Franchisors sentiment for franchisor growth prospects and access to financing increased, however sentiment for both access to suitable staff and operating costs remained at lower levels.

The Franchize Consultants’ January 2015 Franchising Confidence Index demonstrates an increase in confidence across overall sector growth drivers.

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• The latest results indicated positive franchisor (net 69%) and Service Provider (net 94%) sentiment toward general business conditions. These results were not reflective of the latest results of other more general business surveys including the ANZ Business Outlook (30% in December) and NZIER (21% in January) business confidence surveys.
   
• Both franchisors (net 57%) and Service Providers (net 80%) were positive about prospects for franchisor growth. This these results increased from the results in the previous quarter of net 38% and net 50%, respectively.
   
• Franchisors sentiment toward access to financing also increased from a 21% to 41%, Service Providers are even more positive than franchisors at a net 88%.
   
• Franchisor sentiment toward access to suitable franchisees increased this quarter, from negative net 17%, to a net 17%. Service Providers, meanwhile, were notably more optimistic at a net 44%.
   
• Franchisor confidence in access to suitable staff decreased slightly from negative net 17% to negative net 18%. Service Providers were slightly more positive at a net 6%.
   
• Franchisor sentiment towards access to suitable locations increased from negative net 17% to net 12%. Service Providers were more positive at net 27%.
   
• Franchisor and Service Provider sentiment towards future franchisee sales levels remained at a high level. Franchisors at a net 62%. Service Providers up to a net 80%, up from net 50% in the last quarter.
   
• Franchisor confidence in franchisee operating costs remained negative during this quarter at a net negative 3%. Service Provider sentiment was a net 6%, increasing from negative net 25% from the last quarter.
   
• Sentiment toward future franchisee profitability remained positive overall. Franchisors reported a net 38%, and Service Providers a net 40%.

Overall, Franchize Consultants’ Franchising Confidence Index in January 2015 demonstrates an increase in the levels of optimism recorded in the previous quarter.

Franchisors continue to maintain a positive outlook for general business conditions, sales levels per franchisee, with franchisor growth prospects also showing an increase. We were also encouraged to record a continued positive outlook for franchisee profitability, arguably a franchise system’s most important key performance indicator. Key franchisor identified challenges for growth in 2015 included the availability of suitable staff, operating costs, finding suitable franchisees and a competitive environment.

The sentiment contained within the results indicate that in 2015 both Franchisors and Service Providers expect a strong and positive year for franchising in New Zealand.

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

Franchising Confidence Index Background

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 29 franchisors and 18 Service Providers collected between Wednesday 28 th January and Thursday 5 th February 2015. 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.’

The data and analyses were compiled by Shelley Cross.