October 2016 Quarter Results

KEY FRANCHISING SENTIMENT METRICS REMAIN STRONG

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Key Survey Highlights

• Franchisors and Service Providers sentiment continues to provide an optimistic outlook specifically across franchisee sales levels, franchisee profitability, franchisor growth prospects, and notably increased confidence in relation to access to finance.

• Franchisors sentiment toward general business conditions was substantially more positive this quarter, with Service Providers more subdued.

• Franchisors sentiment about franchisee sales and profit levels saw increased confidence in both areas.

• Franchisor and Service Provider sentiments for franchisor growth prospects continued to show positive increases.

Background

• 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.

• Explores confidence in key measures critical to the success of franchising, including the wider environment, growth determinants, and franchising health attributes and franchise system growth prospects.

• This survey represents the views of 35 Franchisors and 19 Service Providers.

The Focus

GENERAL QUESTION AREAS

1. General business conditions

2. Franchisor growth prospects

3. Franchising growth drivers• Access to capital• Access to suitable franchisees• Access to suitable locations • Access to suitable staff

4. Franchisee growth & profitability prospects• Franchisee sales levels• Franchisee operating costs• Franchisee profitability

5. How are things looking for franchisors and Franchisees in their respective sectors?

Respondents indicate whether they expect the following aspects to be better, the same or worse over the next 12 months (compared to the previous 12 months)

The Results

The latest results indicated more positive franchisor (net 40%) sentiment toward general business conditions. Service Providers by contrast converged, from net 50% in July to a net 42%

The Results

•Franchisors (net 46%) remained stable about prospects for franchisor growth. These results are in line with the net 45% in the previous quarter.

Franchisors sentiment for franchisor growth prospects continued to gain momentum at net 57% compared with a net 46% in July. Service Providers perceptions showed a slight increase at a net 53% up from net 50%

The Results

Franchisor sentiment toward access to suitable franchisees was more subdued up 1% to a net 12%. Service Providers, however were far more positive with an increase of net 16% to net 21%.

The Results

Franchisors remained constant and subdued in sentiment toward the availability of suitable staff at a net negative 13%, down from net negative 12%. Service Providers were moderately more positive at a net 5%, although down on the more positive net 5% in July. Clearly finding suitable staff is a key challenge and one that is envisaged to worsen, on balance.

The Results

The ongoing fluctuations in access to suitable locations continued this quarter, decreasing from net 6% to net negative 13% for Franchisors.Service Providers sentiment on the other hand was equally more positive up from net 5% to net 26%.

•Franchisor sentiment towards access to suitable locations was again positive increasing from net 3% to 6%. Service Providers dropped back to net 5%, after having experienced a spike at net 53% in the January survey.

The Results

The dip in the outlook for operating costs in July has improved slightly for Franchisors this quarter from net negative 6% to a net 0%. Service Provider outlook for franchisee operating costs has taken a further dip decreasing from net 5% to a net negative 11%.

The Results

Both Franchisor and Service Provider sentiment for franchisee sales levels showed a further positive increase this quarter, with the franchisors increasing from a net 51% to net 63%. Service Providers, whilst overall slightly less positive than Franchisors showed an increase from a net 30% to a net 42%

The Results

Sentiment toward franchisee profitability levels continue to fluctuate up and down between Franchisors and Service Providers. Franchisor sentiment grew in confidence, up from a net 40% in July to a high net 49% in October.Service Providers by contrast reduced forward looking sentiment, down net 19% on the July net 40%, leaving October at a net 21%.

The Results

Franchisor and Service Provider sentiment toward access to financing bounced back significantly for Franchisors from net 0% to net 15%, whilst the increase for Service Providers was less confident at net 0% up from negative net 5%.

More Information

www.franchisingconfidence.co.nz

Including:• More detailed and complete results and

analysis• All charts and illustrations

Franchize Consultants

• The Franchising Confidence Index, is founded, designed and operated by Franchize Consultants, New Zealand specialists in franchising and licensing network development. Founded in 1989, Franchize Consultants have a long and supporting association with New Zealand franchising.

• For further information contact Dr Callum Floyd• Ph. (09) 523 3858• Mob. 021 669 519• Email. callum@franchize.co.nz• Web. www.franchisingconfidence.co.nz • Web. www.franchize.co.nz