Shortage of franchisees, staff, limiting growth

The latest Franchising Confidence Index continues to demonstrate mixed feelings among franchisors and service providers, with sentiment fluctuating from quarter to quarter. While expectations have improved with regard to access to financing and improved sentiment towards profitability levels, concerns about the availability of suitable franchisees and suitable staff continue. ‘Getting staff and/or franchisees is next to impossible and is the single biggest issue we face,’ commented one franchisor.

While there is ongoing uncertainty about general business conditions, franchisors are as usual more positive about general business conditions compared to other surveys. It means that, despite good opportunities in many industries and areas, it’s hard for some franchises to expand and meet growing demand. ‘Demand is starting to pick up again, per normal for the latter part of the year. There is still a scarcity of people wanting to purchase a franchise despite high level of interest,’ one franchisor reported.

Other notable themes included uncertainty due to increasing wage requirements and immigration requirements, with the latter also increasing perceived pressure on access to staff and franchisees. The food & beverage and cleaning markets expressed concern around the impact of increased fuel costs and the flow-on effects of that. A number of comments alluded to industries where demand is very strong and growth is improving: property management and renovations were two of particular note, along with business support. In the popular café sector, ‘New immigration laws and minimum wage increases are making employment more difficult. Like-for-like sales continue to grow at a steady rate which is positive obviously.’

Service Providers also showed a mix of positive and negative sentiment. Comments alluded to a level of uncertainty both nationally and internationally, although on the converse side there were positive feelings toward this settling down and recovering in the future.

Expert comment

‘The latest survey continues to show there is still an air of uncertainty mainly driven by changes to government policy and the speculative effects this will have on the economy,’ says Dr Callum Floyd of Franchize Consultants, which carries out the quarterly Franchising Confidence Index. ‘As you would expect, this can have both positive and negative impacts, with comments alluding to specific areas of business seeing a lot of growth whilst others are experiencing a flat or slightly declining base.’

Callum notes that, ‘There are areas where sentiment is decreasing markedly one quarter only to increase back in the next, such as access to finance and franchisor growth prospects, confirming the uncertainty. General business conditions increased slightly in sentiment this quarter: with the regulatory changes coming into effect early in July the caution in sentiment towards general business conditions may have been influenced by the unknown outcomes of these changes, which could settle over the next few quarters.’

The data and analysis presented represents the views of 33 Franchisors and 14 Service Providers collected between Monday 25 June and Friday 29 June 2018. Read the full FCI report here.

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