LATEST SURVEY SHOWS
FRANCHISE CONFIDENCE BOUNCING BACK
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July 2011 - Franchising confidence is building again, with good news for business buyers. However, the Rugby World Cup is expected to provide at best a limited boost to many.
After a dismal outlook following the Canterbury earthquakes, the latest Franchising Confidence Index finds considerable improvements to most key indicators. Franchisors and service providers are unified in their outlook for improved general business conditions. Similarly, expectations for access to financing also reach new heights. Notably, franchisors (net 24%) are positive in their access to financing for the first time since the survey began in April 2010. Interestingly, most franchisors (63%) did not think the Rugby World Cup would have a positive impact on their franchise system.
The July 2011 survey, the latest in the series conducted quarterly by Franchize Consultants, showed that both franchisors and service providers foresee improvements in general business conditions. For franchisors, increased optimism sent confidence up to a net 41% from the record -3% low in April. Service providers were even more optimistic with a net 65%. This positive outlook is also reflected in other general business confidence surveys in June, namely NZIER (27%), BNZ (57%) and National Bank (46.5%).
Franchisors also consolidated future optimism in their own growth prospects (net 39%). Meanwhile service providers, on balance, are even more confident in their growth outlook for franchisors (net 55%).
For the first time, franchisors’ expectations for access to financing also rose to a positive net 24%, breaking out of the negative trend that lasted more than a year. Service providers remained optimistic (net 43%).
Franchisee recruitment is still a challenge for franchisors. Although franchisors registered marginal improvement in their sentiment it remained subdued at a net 8%, although service providers are considerably more optimistic (net 41%). This is good news for qualified business buyers as it suggests that people who could make good franchisees will be in high demand for some time to come.
A majority or franchisors (63.4%) indicated that the Rugby World Cup would not have a positive impact on their franchise system. 24.4% responded ‘maybe’ and 12.2% responded ‘yes’. Those that did believe the Rugby World Cup would shed some positive light on their businesses were clearly associated with hospitality, accommodation, tourism and, to a lesser extent, general retail.
Rather than being an impetus to sales, some franchisors consider the Rugby World Cup will bring problems such as traffic congestion, time off by franchise owners, reduced access to houses near grounds, and disruption to schooling.
Franchize Consultants’ Franchising Confidence Index is a quarterly survey measuring confidence in key areas critical to the success of franchising in this country. It reports 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 above represents the views of 41 franchisors and 23 service providers collected between Monday 4 and Friday 8 July 2011.
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