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BUSINESS CONFIDENCE DOWN BUT FRANCHISING MORE POSITIVE

by Simon Lord,
last updated 01/02/2018

31 January 2018 - Concerns about business confidence are reflected in the latest Franchising Confidence Index survey, but what's really happening?

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Overall trends from the quarterly Franchising Confidence Index

Overall trends from the quarterly Franchising Confidence Index

Top challenges to franchise development in 2018

Top challenges to franchise development in 2018

Franchisor expectations for 2018

Franchisor expectations for 2018

Uncertainty about new government policies, a softer housing market and reduced immigration saw confidence among small business owners drop dramatically at the end of 2017, but overall growth expectations remained positive, according to an ANZ survey.

The quarterly Franchising Confidence Index survey conducted by Franchize Consultants shows that  franchisors' concerns last October have quietened following the election, with both franchisors and service providers having a more positive outlook than general business confidence surveys, as is often the case. The last Index, in October, showed confidence dipping during the post-election negotiations, and most of the areas measured remain subdued as new policies are gradually announced. For example, the impact on staff availability of proposed changes in employment law and immigration policies remains to be seen. However, there are a few areas of improvement and it's worth noting that franchisors' outlook on profitability remains positive on balance.

'Personally, I think there is a lot of pessimism about what could happen, rather than what is actually happening with regard to general business conditions,' says Dr Callum Floyd of Franchize Consultants.

Challenges and opportunities

Franchisors were asked what they perceived to be the greatest challenge to franchising development in the year ahead. Almost half  of responding franchisors identified finding franchisees as the top challenge to their development. Finding franchisees was followed mainly by concerns around the level of franchisee establishment investment and operating cost pressures, and, both franchisor and franchisee ability to hire suitable staff.

Other key challenges cited included factors relating to economic concerns and uncertainty  and references to challenges to, or sustainability of, their franchisee business model. Franchisors and Service Providers were also asked what they perceived to be the greatest opportunity related to franchising development in the year ahead.  A wide variety of internal and external factors were cited; key themes included innovative ways of marketing, looking for opportunities to differentiate from competition, broadening locations offered, and economic conditions.

Callum concludes, 'Franchisors continue to maintain a positive outlook for growth prospects, availability of suitable locations, and availability of suitable staff.  We were also encouraged to record a continued positive outlook for franchisee profitability, arguably a franchise system’s most important key performance indicator.  The sentiment contained within the results indicate that in 2018 both Franchisors and Service Providers expect a positive although challenging year for franchising in New Zealand.'

The data and analysis presented represents the views of 32 franchisors and 14 Service Providers collected between Monday 22 January and Friday 26 January 2018. 

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