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LATEST SURVEY SHOWS
FRANCHISORS STILL MOSTLY POSITIVE

by Simon Lord,
last updated 29/08/2014

in this article:

August 2014 - Franchize Consultants’ July 2014 Franchising Confidence Index finds franchisors retain an optimistic outlook across many key growth drivers, although service providers are more cautious

Franchisors remain positive in their outlook for general business conditions (net 53 percent), and sales levels per franchisee (net 70 percent). Franchisor growth prospects increased 22 percent from the previous quarter to a net 63 percent.

While the 30 Franchisors in the survey remain subdued in their outlook for the availability of suitable staff (net -7 percent) and suitable locations (net -8 percent), sentiment towards access to suitable franchisees increased from -3 percent to +17 percent. They also reported a solid outlook for franchisee profitability (net 53 percent), arguably a franchise system’s most important key growth driver. However, Service Providers were less optimistic at 7 percent, a drop from 31 percent in the previous quarter.

Franchisor sentiment for general business conditions (net 53 percent) was slightly down after extreme levels of optimism in the previous quarter. This tops other research involving general business, including ANZ Business Outlook (40 percent in July) and NZIER (32 percent in June) business confidence surveys. The 15 Service Providers who responded reported an extreme decrease in sentiment from 92 percent to 27 percent, which is more in line with the general surveys.

18 Franchisors also provided qualitative responses on how things were looking in their sector. Notably, the education, tourism, retail and construction sectors reported strength and growth, but also advised of challenges with finding suitable franchisees and employees. Retail food still reports a competitive market, but as one comment said, ‘Retail is looking a lot better going forward – still strong regional differences in performance.’

Service Providers were similarly asked how they thought things were looking for franchisors and franchisees. Most responses were positive; however, there was some concern for restrained cashflow and competition for newer franchisees. ‘Consolidating and steadily more upbeat overtime. However there is considerable competition for franchisees, making it tougher for new, young and/or under-performing franchise systems.’

And another comment reflected the disruption caused every three years by our frequent elections: ‘Once the election has taken place we will see a return to business as usual, seems like people are holding off now to see how much influence parties might have.’

‘In summary, optimism needs to be balanced with challenge,’ comments Dr Callum Floyd of Franchize Consultants. ‘While the perceived outlook improves and/or remains strong on many key variables, perceived difficulties also remain. Franchisors, as for other businesses, will need to plan and manage for growth and performance. Very few (only 2 out of 30 Franchisors) expected a better outlook across all areas.’

The data and analysis presented represents the views of 30 franchisors and 15 Service Providers collected between Monday 28 July and Friday 1 August 2014. Read the full report here.

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