MIXED SENTIMENT AS FRANCHISING ENTERS NEW YEAR
January 2011 - The latest Franchising Confidence Index from Franchize Consultants finds mixed sentiment, including further challenges for franchisees
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On the whole, franchisors’ sentiment towards general business conditions has stabilised in postive territory, and they are still generally positive about their growth prospects although service providers are not so encouraging. Franchisee profits are expected to remain challenged despite perceived improvements to general business conditions, access to suitable staff and access to suitable locations. Franchisee sales levels and operating costs are also expected to deteriorate over the next 12 months.
Many challenges were noted, including the Christchurch earthquake, few forward sales, demand for low-cost (versus premium) products, depressed demand from consumers not spending, increased competition, lower supplier loyalty, margin pressure, lease problems and issues with access to capital. These varied across sectors.
Some franchisors were more optimistic, noting increased interest from prospective franchisees, returning consumer confidence, increased sales, average spend and conversion rates. Read the full report here.
Although the business environment remains uncertain, some franchisors are reporting positive results and growth. However, these do not necessarily apply across all sectors. It is therefore more important than ever for prospective franchisees looking to take advantage of this low point in the economic cycle to choose their new business extremely carefully, to compare results within sectors and to talk to existing franchisees to see how they have fared and how their franchisors have addressed problems and opportunities.
Franchize Consultants’ Franchising Confidence Index is a quarterly survey of 300 New Zealand franchisors and 90 specialist service providers (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 data presented in the latest survey represents the views of 37 franchisors and 24 service providers collected between Monday 17 and Friday 21 January 2011.
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