NEW ZEALAND FRANCHISORS FORECAST IMPROVED TOP LINE. MARGIN PRESSURE CONTINUES.

The Franchize Consultants’ October 2012 Franchising Confidence Index demonstrates a continuation of mixed results across overall sector growth drivers.

Click here for a full copy of the October 2012 Franchising Confidence Index report.

For a summary of key findings you can also view the following presentation.

• 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

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 2010 survey, conducted by Massey University in collaboration with Griffith Business School, indicates New Zealand has 423 individual franchise systems comprising some 23,600 units (owned mostly by franchisees). The survey also suggests local franchise systems employ some 80,400 people, including 57,700 permanent full-time employees. 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 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.’