Franchising Sentiment Shows Continued Optimism

Click here for the full April 2014 report

The Franchize Consultants’ April 2014 Franchising Confidence Index demonstrates a further increase in a general trend towards improved confidence across overall sector growth drivers.

• The latest results indicated positive franchisor (net 63%) and Service Provider (net 92%) sentiment toward general business conditions. These results were shared by the latest results of other more general business surveys including the BNZ (net 64% in April), ANZ Business Outlook (67% in March) and NZIER (52% in December) business confidence surveys.
  
  
• Both franchisors (net 41%) and Service Providers (net 69%) remain positive about prospects for franchisor growth.  However, this is a decrease from the results in the previous quarter of net 62% and net 93%, respectively.
  
  
• Franchisors sentiment toward access to financing dropped from a positive 9% to 3%, Service Providers are more positive than franchisors at a net 38%.
  
  
• Franchisor sentiment toward access to suitable franchisees decreased slightly this quarter, from a neutral 0%  to negative net 3%.  Service Providers also showed less optimism than previously at a net 8%.
  
  
• Confidence in access to suitable staff decreased. Franchisor sentiment dropped from  net 3% to negative net 19%.  Service Providers also decreased to negative net 15%.
  
  
• Franchisor sentiment towards access to suitable locations increased from 0% to 7%.  Service Providers reported a net 8%.

• Franchisor and Service Provider sentiment towards future franchisee sales levels remained at a high level. Franchisors’ at a net 65%. Service Providers up to a net 85%.
  
  
• Franchisor confidence in franchisee operating costs remained negative during this quarter at a net negative 6%.  Service Provider sentiment was a net negative 46%, decreasing from negative net 40% from the last quarter.
  
  
• Franchisor sentiment toward future franchisee profitability remained positive, with Franchisors reporting a net 50%.

Overall, Franchize Consultants’ Franchising Confidence Index in April 2014 demonstrates continued positivity, though not quite as high as the record levels recorded in the previous quarter.  This positive sentiment was shared by other recent general business confidence surveys.

Franchisors continue to maintain an optimistic outlook for general business conditions, sales levels per franchisee and franchisor growth prospects.  We also recorded an increase in positivity for franchisee profitability, arguably a franchise system’s most important key performance indicator.  However there was a general decline in the perceived availability of suitable locations and staff, and concern regarding rising operating costs.