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STRONG OUTLOOK FOR FRANCHISING DESPITE STAFFING SHORTAGE

by Simon Lord,
last updated 27/07/2017

5 July 2017 – The latest Franchising Confidence Index demonstrates a continued increase in confidence levels across many areas

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The availability of good staff is a concern for many franchises

The availability of good staff is a concern for many franchises

Franchising Confidence Index - Summary, July 2017

Franchising Confidence Index - Summary, July 2017

The latest of Franchize Consultants’ quarterly surveys shows positive attitudes among Franchisors and specialist Service Providers towards general business conditions, franchisee sales levels and franchisor growth prospects. Availability of suitable staff is a standout challenge, though, while positivity toward franchisee profitability levels has diminished slightly.   

Franchisor sentiment for franchisor growth prospects continues to remain stable at net 45 percent, and Service Providers are similar at net 43 percent.

Franchisor sentiment toward access to suitable franchisees increased markedly from a net negative 10 percent to a positive net 13 percent. Service Providers were equally positive with an increase to net 36 percent, up from 24 percent. However, sentiment toward access to financing differed, with Franchisors more positive at a net negative 8 percent (improved from a negative 18 percent) while Service Providers sentiment deteriorated from a net 0 percent to a negative 21 percent.

Both Franchisor and Service Provider sentiment toward franchisee sales levels remained strong at a net 51 percent and 43 percent, respectively although Franchisor sentiment toward franchisee operating costs declined from a net 0 percent to a net negative 15 percent. Service Provider outlook remained at a net negative 21 percent - albeit slightly improved from April (net negative 29 percent).

Franchisor sentiment towards franchisee profitability levels took a dip to still positive net 18 percent, down from an April net 40 percent. This is similar to this quarter last year, and may reflect higher seasonal costs in some sectors. Conversely, Service Providers were more positive at a positive net 29 percent, up from 0 percent in April.

Staffing an issue

‘The outlook for franchisee sales continues to remain strong, as do franchisor growth prospects and franchisor sentiment toward general business conditions,’ says Dr Callum Floyd, managing director of Franchize Consultants. ‘However, the results and comments continue to highlight an increasing constraint to growing businesses – namely, the ability to access suitable staff. We note this pattern in many industries, particularly hospitality.’

Comments from Franchisors and Service Providers included:

New Visa laws are impacting on recruitment of staff significantly.

Challenges include continued wage pressure, immigration changes that will potentially restrict access to staff (which there is already a critical shortage of).

The biggest issue we are facing is good quality staff.

‘Importantly, overall, franchisors remain positive about franchisee future sales levels. Whilst there are concerns around franchisee operating costs, franchisors on balance are still net positive about future franchisee profitability levels.

‘Increasingly, as indicated in the wider press for business generally, franchisors need to take an active role in adapting and future-proofing their franchise systems in an environment with many forces of change.’

About the survey

The Franchising Confidence Index is a quarterly survey of the New Zealand franchise sector which has been conducted by Franchize Consultants since 2010. The data and analysis presented represents the views of 39 Franchisors and 14 Service Providers collected between Monday 26 June and Friday 30 June 2017. Findings from both groups are reported separately. Read the full report here. 

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