START-UPS RISE AS OUTLOOK REMAINS
POSITIVE FOR FRANCHISES
14 May 2015 - The latest Franchising Confidence Index confirms the positive mood among franchisors and service providers
Over the last couple of months, franchisors have been reporting an improvement in new franchisee start-ups, with one home services franchisor saying that they had granted as many new franchises in 2015 already as they did in the whole of last year. Demand is stronger in some parts of the country than others, and stronger in some industries than others, but the general outlook reflects the optimism of the February Franchise Confidence Index.
Now the latest survey of franchisors and service providers confirms the mood. Although moderated slightly from the previous quarter, Franchize Consultants’ April 2015 edition of the Franchise Confidence Index continues the optimistic outlook. Franchisors remained positive in their outlook for general business conditions (net 41%), sales levels per franchisee (net 38%) and franchisor growth prospects (net 59%), although they held a negative view on balance on the availability of suitable staff (negative net 7%), and operating costs per franchisee (negative net 10%).
A very positive sign was that sentiment toward franchisee profitability, arguably a franchise system’s key health and growth driver, increased from 38% to 41% as reported by responding franchisors. Service providers also were more positive in their sentiment this quarter, reporting a net 55%.
The outlook for general business conditions is a key measure for this research because it can be compared with many other general business confidence surveys. Franchisors were still positive (net 41%), albeit this is down from 69% in the last quarter. Service Providers also remained positive reporting 36%. The net 41% positivity experienced by franchisors is higher than that of other research involving general business, including ANZ Business Outlook (35.8% in March) and NZIER (20% in March) business confidence surveys.
Individual franchisors quoted in the survey report various challenges in their own sectors and, as one franchisor suggested, ‘Dairy pay-outs are a looming dark cloud in regional NZ.’ Overall, however, franchise confidence is based upon some important factors as one service provider pointed out:
“Population growth will assist gaining franchisees and staff and buyer demand (sales). Stability from low interest rates will continue to provide consumers with financial stability and confidence. Banks continue to compete aggressively, ensuring funding will be provided when it is appropriate to do so.”
As Dr Callum Floyd of Franchize Consultants concludes, ‘The April 2015 Index demonstrates a positive outlook, though more subdued than the previous quarter. Although confidence is down from the extremely high levels reported last year, franchisors and service providers do remain reasonably optimistic. ‘
The data and analysis presented represents the views of 29 franchisors and 11 Service Providers collected between Tuesday 28th April and Friday 8th May 2015. Read the full report.
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