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FRANCHISE CONFIDENCE BOUNCES BACK FOR 2016

by Simon Lord,
last updated 26/11/2015

3 November 2015 - After a dip in July, confidence in the franchise sector is bouncing back – but franchisees are still in high demand, says latest survey

The latest Franchising Confidence Index survey from Franchize Consultants found that franchisors are extremely positive in their outlook for general business conditions (net 42 percent), access to financing (21 percent), sales levels per franchisee (53 percent), franchisee profitability levels (26 percent) and franchisor growth prospects (47 percent). 

The biggest risk to growth prospects seems to come from the availability of suitable franchisees (negative net 16 percent, up from negative 8 percent) and the availability of suitable locations (negative net 6 percent). Expected operating costs per franchisee, while still a negative net 6 percent, improved from negative 16 percent last quarter.  

Sentiment toward franchisee profitability, arguably a franchise system’s key health and growth driver, increased from a net 19 percent to 26 percent, as reported by responding franchisors.  Service providers were also more positive in their sentiment this quarter, reporting a net 27 percent. 

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 encouragingly positive (net 42 percent) this quarter, up 14 percent.  Service Providers reported 7 percent, which is also an increase. Data was collected before the Rugby World Cup final boosted national endorphin levels.

The net 42 percent positivity experienced by franchisors is markedly higher than that  of other research involving general business, including ANZ Business Outlook, (net 10 percent in October) and NZIER business survey, which is now in the red (negative net 9 percent in October).

comments vary

There was an interesting range of comments from the respondents to the survey. While these were mostly positive, a lot of comments were very industry- or area-specific, with good reports from the education, building and related services sector.

Retail continues to face challenges from online shopping and competitive pricing, while one service provider raised concerns about the impact that increased occupation levels in Auckland would have on market rents for food and retail operations. The same commenter thought the regions would benefit more than Auckland  from increased consumer spending.

One positive sign for franchise recruitment is that, ‘Financing costs remain at historically low levels and net immigration should continue to assist with securing franchisees and staff.’

Note: The data and analysis presented represents the views of 20 franchisors (fewer than normal) and 15 Service Providers collected between Monday 19th October and Friday 30th October 2015.

Read the full report.

Franchising Confidence Index summary November 2015

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