April 2012 Quarter Results

Background

• Quarterly survey of 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 37 franchisors and 19 service providers.

The Focus

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 staff4. Franchisee growth & profitability prospects• Franchisee sales levels• Franchisee operating costs• Franchisee profitability5. How are things looking for franchisors and Franchisees in their respective sectors?6. What is expected to provide the greatest challenge to franchising development this year?7. What is the number one topic, related to being a franchisor, that you would like to know more about?

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

The Results

Both franchisor (net 46%) and service provider (net 65%) outlook for general business conditions were strong, hitting the highest levels recorded since the Franchising Confidence Index was established. Both results also consolidated previous gains in January, following the substantial deterioration in October 2011. For the first time, franchisor sentiment appears considerably more positive than that indicated by general business in the April NZIER (24%), April BNZ (34%) and March National Bank (34%) business confidence surveys.

The Results

Franchisor (net 46%) and service provider (net 65%) outlook for franchisor growth prospects also improved markedly from the previous quarter – helping to arrest a striking downward trend that had become more apparent over time.

The Results

Perhaps disappointingly, the aforementioned confidence improvements did not extend to the concept of access to finance. Both franchisors (net 16%) and service providers (net 39%) recorded small changes from the previous quarter.

The Results

In regards to the ease of access to suitable franchisees, a significant uptrend was noted in franchisor sentiments (net 14%). However, service providers’ sentiment decreased (net 26%).

The Results

Franchisor confidence in access to suitable staff demonstrates a considerable overall downtrend since the Franchising Confidence Index was first established. Sentiment regarding access to suitable staff for both franchisors (0%) and Service providers (net 4%) decreased considerably.

The Results

The franchisor outlook for access to suitable locations decreased considerably as well. The decrease in franchisor confidence regarding access to locations (net 14%) is balanced out by an increase in service provider sentiment (30%).

The Results

Franchisor and service provider expectations for franchisee sales levels grew from a net 29% and 11% to 51% and 52%, respectively.

The Results

Franchisor outlook for franchisee operating costs improved slightly (from -26% to -24%), whilst remaining negative overall. Service providers were similarly negative, but more negative than the previous data point (dropping from -11% in April to -43%).

The Results

Both franchisor and service provider sentiment toward franchisee profitability has grown substantially, from a net -8% and -5% to a more positive 30% and 14%, respectively.

Presumably franchisors and service providers expected increased sales to more than offset any concerns for franchisee operating costs. The net difference (i.e., increased profitability), if experienced, will be welcome news for franchisees.

Results Summary

• Franchising sentiment built further upon the previous quarter’s improvements, however uncertainty remains on some factors. Importantly, the outlook for general business conditions has hit new heights, franchisor growth prospects have solidified, and crucially, the outlook franchisee profitability has improved.

• Notable improvements are recorded for general business conditions, franchisor growth prospects, sales levels per franchisee and franchisee profitability levels, despite continuing concerns for franchisee operating costs.

• Meanwhile, access to suitable staff falls to the lowest level on record. Access to suitable locations experiences striking decreases as well.

More Information

www.franchisingconfidence.co.nz

Including:• The Greatest Challenge to Franchising

Development in 2012• More detailed and complete results and

analysis• All charts and illustrations• Franchisor and service provider comments in

their entirety

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.biz