FRANCHISE EXPERT calls for government recognition
as sentiment falls
last updated on 26th October 2010
October 2010 - Dr Callum Floyd has called for the government to increase its awareness of the part franchising can play in New Zealand’s economy and to create the right conditions for recovery.
A director of Franchize Consultants (NZ) Ltd, which carries out the quarterly Franchising Confidence Index survey, Dr Floyd notes a continued downward trend in sentiment in the franchise sector and low levels of expectations for many key franchising variables. ‘This is of considerable concern to franchisors and franchisees, and should concern the wider economy and government.’
‘Franchising is pervasive, covering many important sectors of business from grocery to home services, and is a great contributor to job growth, business training, SME compliance (due to good business systems) and GDP. But it requires the right environment including, crucially, access to capital for expansion and confidence.’
‘Many well-known (and lesser-known) franchisors and franchisees have been hammered by the economy and continue to trade and battle despite considerable adversity. They do not crave handouts but they are desperate for an environment that fosters positive business growth and development.’
‘It’s time government recognised franchising properly for its contribution and needs.’
The latest Franchising Confidence Index survey, released in October, found ‘positive but falling’ sentiment across many key franchising indicators including general business conditions, access to financing, suitable franchisees and locations. Meanwhile, franchisee sales levels and operating costs, and franchisor growth prospects are forecast to improve, while availability of suitable staff and franchisee profitability levels are expected to remain unchanged.
Encouragingly, franchisor sentiment for franchisee sales levels climbed to net 48% (from 36% in July), and the outlook for operating costs improved dramatically – with a net 51% (compared to -29% in July) expecting improvements over the next 12 months. Meanwhile, a net 16% of franchisors expect franchisee profitability levels to be better (same as July, but down from 41% in April).
Comparatively, service providers were far less optimistic in their outlook for franchisees, generally. A net 7% (27% in July) expected deterioration in franchisees sales levels. 41% (compared to 46% in July) expected deterioration in operating costs. Finally, a net 24% expected franchisee profitability levels to deteriorate. Overall, while franchisors expect improvements in sales and growth, both groups clearly see tough times ahead for franchisees generally. However, the response varies according to which industry the franchise respondents are operating in. Franchisors were asked ‘How things are looking in their sector,’ and service providers ‘How things are looking for franchisors and franchisees (generally).’ Franchisor comments indicate huge variations in current and expected sales activity. Indeed comments range from ‘still very grim’ to ‘solid and looking promising.’ On balance, sales were challenging, but expected to improve – with some franchise systems more positive than others.
Send for a free copy of our print magazine, the authority on buying a franchise.