New Zealand Franchising Confidence Index | July 2012

July 2012 Quarter Results FRANCHISING OUTLOOK POSITIVE, BUT REDUCED. FUNDING STILL AVAILABLE FOR SOLID FRANCHISEE PROPOSITIONS

About Franchize Consultants • Franchize Consultants is the first point of contact for companies considering franchising their business • Franchize Consultants helps established franchised (and other network format) chains review and improve performance for both franchisors and franchisees • Franchize Consultants conducts specialist research for franchising insight and practical application • Franchize Consultants builds franchisor executive and franchisee capability and performance through focused training and education programmes

Key Survey Highlights • Franchisor sentiment remains mostly positive, with reductions noted from the record measures reported in April 2012 • Sentiment reductions reported on outlook for general business conditions, access to both financing and suitable franchisees, and franchisee sales and profitability levels • The majority (66%) of franchisor respondents indicate a solid franchisee proposition is just as likely to be funded by one of the main banks as it once was • Sixty one percent of franchisor respondents agree that their growth is not being constrained by access to bank funding for new franchisees

Background • Quarterly survey of more than 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 41 franchisors and 19 service providers.

The FocusGENERAL QUESTION AREAS1. General business conditions2. Franchisor growth prospects3. Franchising growth drivers Respondents indicate• Access to capital whether they expect• Access to suitable franchisees• Access to suitable locations the following aspects• Access to suitable staff to be better, the same4. Franchisee growth & profitability prospects or worse over the• Franchisee sales levels next 12 months• Franchisee operating costs (compared to the• Franchisee profitability previous 12 months)5. How are things looking for franchisors and Franchisees intheir respective sectors?

Special Additional FocusFUNDING –RELATED QUESTION1. Thinking about my own franchise network, I believe a solidfranchisee proposition is just as likely to be funded by one of Respondents selectthe main banks as it once was their level of2. I believe the growth of my franchise network is ‘not’ being agreement with eachconstrained by access to bank funding for new franchisees statement: Strongly3. I believe that there may be more that my franchise network Agree, Agree, Neutracan do to make my system more fundable l, Disagree or4. I am interested in learning more about how my franchise Strongly Disagree.system could become more fundableNote: Service providers were also asked for their views on the first three statements from abroader franchise sector viewpoint.

The Results Both franchisor (net 22%) and service provider (net 34%) outlook for general business conditions remain positive, but have dropped after last survey’s record increase.

The Results Franchisor outlook for franchisor growth prospects improved slightly from the previous quarter at net 54%, however service providers’ outlook for franchisor growth generally showed a marked drop to 18% from 65% in April).

The Results Confidence levels regarding access to finance remained relatively stable for franchisors at 15%; however service providers showed, again, a marked decrease at a low net 7% (a decrease of 32% from last quarter).

The Results Franchisors and service providers remain only slightly positive in their outlook toward ease of access to suitable franchisees, reporting a net 7% and 4%, respectively

The Results Franchisor confidence in access to suitable staff demonstrates a slight increase from the bottom level results last quarter, increasing to net 12% from 0% in April. Service provider sentiment for access to suitable staff for franchisors generally deteriorated slightly to a net 1% from 4% (in April).

The Results Franchisor and service provider outlook for franchisor access to suitable locations were at directional odds (i.e. one grew, one decreased), settling at a net 21% and 6% respectively.

The Results Franchisor and service provider expectations for franchisee sales levels both decreased this quarter, showing the only measure in which opinions were reasonably aligned. Franchisors dropped to 34% and service providers to 39%, respectively.

The Results Franchisor and service provider outlook for franchisee operating costs remained negative at a net -12% and -17%, respectively.

The Results Franchisor and service providers report a positive net outlook for franchisee profitability at a net 5% and 20%, respectively. Comparisons to the previous period indicate contrasting views. Franchisors are less positive. Service providers are more positive.

The Results: Special Funding QuestionsSurprisingly, franchisor respondentsmostly agreed that funding has notchanged due to the tougheconomic climate, with 27/41(66%) indicating either StronglyAgree or Agree.This sentiment was largely mirroredby service providers, with 13/19(69%) indicating Strongly Agree orAgree to the aligned statement ‘Ibelieve a solid franchiseeproposition is just as likely to befunded by one of the main banks asit once was.’

The Results: Special Funding QuestionsFranchisor respondents mostlyagreed that their respectivefranchise network’s growth was notbeing constrained by access to bankfunding for new franchises. A solid61% reported either Strongly Agreeor Agree with this statement.Service providers were somewhatsupportive of this view, with 10/19(53%) noting Strongly Agree orAgree to the statement ‘I do notbelieve the growth of New Zealandfranchising is being constrained byaccess to bank funding for newfranchisees.’

More Information Including: • More detailed and complete results and analysis • All charts and illustrations www.franchisingconfidence.co.nz

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

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New Zealand Franchising Confidence Index | July 2012

by Franchize Consultants on Jul 31, 2012

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New Zealand Franchising Confidence Index | July 2012 Presentation Transcript