Optimism Builds within NZ Franchising sector

The Franchize Consultants’ April 2013 Franchising Confidence Index has shown improved optimism for most key growth drivers, as reported by responding franchisors and service providers.

The Franchising Confidence Index (FCI) represents the views and expectations of franchising, an important domain of business within the New Zealand economy. The FCI reports on franchisor and specialist service provider attitudes toward general business conditions, as well as key franchisor growth determinants including access to capital, suitable potential franchisees, staff and locations.

In the most recent survey, franchisors were most positive about improvements to franchisor growth prospects, sales levels per franchisee, general business conditions, franchisee profitability levels, and access to financing, respectively. A neutral to negative outlook remained for availability of suitable staff, franchisees and locations, and operating costs per franchisee.

The Franchize Consultants’ April 2013 Franchising Confidence Index demonstrates a general trend towards improvement in confidence across overall sector growth drivers.

• Franchisor sentiment for general business conditions (at net 53 per cent) tops that indicated in recent general business forecasts, as reported in the March NZIER (23 per cent), ANZ Business Outlook (35 per cent) and BNZ (25 per cent) business confidence surveys.

• Both franchisor and service provider forecasts for franchisor growth improved, with franchisors substantially increasing from 41 per cent to 58 per cent, and service providers from 61 per cent to 67 per cent.

• Franchisor sentiment for access to suitable franchisees dropped from net 5 per cent to 0 per cent. Conversely, service providers showed a large increase from net 9 per cent to net 38 per cent.

• This improvement in confidence was also reflected in the outlook for accessing suitable staff, with franchisors rising to a positive net 3 per cent. Service provider confidence also increased in this area.

• Franchisor outlook for access to suitable locations also rose from a net negative 5 per cent to 0 per cent. Service providers were also positive (net 33 per cent).

• Both franchisors and service providers reported improved sentiment in their outlook for access to financing. Franchisors relayed a substantial net increase of 15 per cent to net 28 per cent. Service providers echoed this, rising to a net 46 per cent.

• Franchisor expectations for franchisee sales levels rose substantially this quarter, from a net 32 per cent to 56 per cent.

• Franchisor confidence in operating costs remained static at net negative 11 per cent.

• Franchisor outlook for franchisee profitability levels reached record levels this quarter, increasing from a net 13 per cent to net 44 per cent. Service providers were slightly less optimistic, reducing sentiment by net 5 per cent.