Franchisor Sentiment Remains Subdued

Franchisor Sentiment Remains Subdued

Franchize Consultants (NZ) Ltd
Media Release

KEY HIGHLIGHTS

The Franchize Consultants’ April 2019 Franchising Confidence Index indicates continued subdued sentiment.

• Franchisor outlook for general business conditions (net negative 15%) dipped after a small lift in January sentiment at net negative 3%, whilst Service Providers sentiment negated the positive gains seen in January of net 19%, to indicate sentiment of net 0%.

• Franchisor sentiment for franchisor growth prospects, is one of the few areas showing improved sentiment at net 35% up from net 23%.  Service Providers on the other hand dropped from net 31% to a net negative 11%.

• Franchisor sentiment toward access to financing hit a low at net negative 31% down from  net negative 18% in January.  Service Providers confidence also low dropping from net negative 6% to a net negative 22%.

• Franchisor and Service Provider sentiment toward access to suitable franchisees continues to fluctuate quarter to quarter. Both Franchisors at net negative 31% (previously net negative 24%) and Service Providers at net negative 11% (down from net 0%) sentiment dipped this quarter.

• Franchisors sentiment towards access to suitable staff has also hit an all-time low at net negative 48%; a sentiment trend which has been declining for a number of years. Service Providers were a little more buoyant at net negative 11%, up from net negative 38%.

• Franchisors, at net 13%, (previously net negative 3%) and Service Providers also at net 13% (from net 0%) showed improved sentiment towards access to suitable locations.

• Franchisors sentiment toward future sales levels per franchisee moved very slightly retaining a positive net 23% (from net 26%), with Service Providers sentiment showing slightly more easing at net 11% (down from net 44%). 

• Franchisee operating costs have been seen as the greatest challenge for some time and it remains the number one challenge based on Franchisor views at a net negative 58% and Service Providers indicate a net negative 78% sentiment.

• Franchisors sentiment regarding franchisee profitability level declined further to a net negative 23%, down from net negative 12% and the lowest point to date. Service Providers positive sentiment of net 19% in January was negated to a net negative 56%.

Concluding Comments

Franchize Consultants’ Franchising Confidence Index in April 2019 demonstrated continued subdued sentiment due to a variety of factors; not least, decreasing demand, increasing labour and other operating costs, and reduced labour supply.

Franchising, as demonstrated by other more general New Zealand business surveys, is not alone in lacking strong confidence toward future business conditions. As we have indicated previously, the key for franchisors will be to continue to take positive business and franchise system improvement steps. We advise continuous thought and initiatives to focus on ways to project momentum forward thus ensuring the continued improvement of both franchisee and franchisor businesses.

We at Franchize Consultants take the view that in difficult times it is vital to focus on the basics of operating your business – including improvements to the unit-level business model. Also important is a continued focus on strong franchise relationships through a strong communication plan and regular franchisee feedback and satisfaction surveys. Finally, a challenging environment is also often a time to consider a Franchise System Review, with the opportunity to optimise the franchise system via identified and prioritised improvements.

For a copy of the full report visit: www.franchisingconfidence.co.nz

Franchising Confidence Index Background

Franchize Consultants’ Franchising Confidence Index is a quarterly survey of circa 400 New Zealand franchisors and 100 specialist service providers (e.g., consultants, banks, accountants, lawyers and publishers) to the franchising community.

The Franchising Confidence Index represents confidence in key measures critical to the success of franchising in this country by reporting attitudes toward general business conditions, as well as key franchising growth determinants including access to capital, suitable potential franchisees, staff and locations. The Franchising Confidence Index also covers franchising health attributes and outcomes by exploring franchisee sales, operating costs and profitability, and franchise system growth prospects.

The data and analysis presented represents the views of 26 franchisors and 9 Service Providers collected between Monday 1 April and Friday 5 April 2019.  Findings from both groups are reported separately.  Respondents were asked whether they expected conditions to be ‘better,’ ‘same’ or ‘worse.’ ‘Net’ confidence is the difference between those reporting ‘better’ and ‘worse.’