October 2012 Quarter Results

FRANCHISORS FORECAST IMPROVED TOP LINE. MARGIN PRESSURE CONTINUES

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Key Survey Highlights

• The October 2012 Franchising Confidence Index demonstrates a continuation of mixed results across overall sector drivers

• Franchisors were most positive in their outlook for general business conditions, franchisor growth prospects and sales levels per franchisee.

• Meanwhile, franchisor forecasts indicated a continuing negative/poor outlook for franchisee operating costs and profitability levels

• Written answers revealed muted improvement in sentiment, though still challenging with specific sub-sectors

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 37 franchisors and 26 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

Franchisor responses improved to a net 28%, compared to 22% in July. Similarly, service provider sentiment improved to 42% (current) from 34%.

The Results

Franchisor outlook for franchisor growth prospects declined from a net positive 54% to 28%, however service providers’ outlook for franchisor growth generally showed an increase from 20% in July to 38%.

The Results

Confidence levels regarding access to finance remained relatively stable for franchisors with only a small drop to 14%; however service providers showed, a marked increase of optimism with a considerable 35% increase.

The Results

Both franchisor and service provider sentiment toward access to suitable franchisees improved – franchisors seemed to be slightly more cautious however, with only a slight 7% increase.

The Results

Franchisor confidence in access to suitable staff demonstrates a drop from the July survey, decreasing from 12% to 6%.Service providers did not share this opinion, however, with an increase of net 22%.

The Results

Franchisor sentiments towards access to suitable locations were relatively stable from July to this quarter, showing only a very slight increase of 2%. Service providers displayed a more dramatic increase of 21%.

The Results

Franchisor and service provider sentiment towards franchisee sales levels echo each other in their downward trend over the last two quarters. They have both shown a decrease to 22% (franchisors) and 19% (service providers).

The Results

Both franchisors and service providers continue to forecast stormy waters for franchisee operating costs, ending at a net negative 17% and 23%, respectively.

The Results

Overall sentiment toward future franchisee profitability levels also declined. Franchisors forecast a net negative 3%, and service providers forecast a net 0%. Both groups are clearly concerned.

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