Franchize Consultants report mixed sentiment from January Franchising Confidence Survey

The results of the January 2011 Franchising Confidence Index have been released by Franchize Consultants , with the business advice specialists finding mixed sentiment within the sector, including further challenges for franchisees.

Franchisee profits are expected to remain challenged despite perceived improvements to general business conditions, access to suitable staff and access to suitable locations. The business consultants report that franchisee sales levels and operating costs are also expected to deteriorate over the next twelve months.

At 30%, franchisor sentiment toward general business conditions has stabilised in positive territory, with 54% of franchisors still generally positive about forthcoming growth prospects for their organisations. In comparison, 21% of franchise service providers retain a positive perspective for franchisors generally.

Access to financing is expected to remain challenging among franchisors, with a net total of 14% indicating conditions will become more difficult. At 8% positive sentiment, service providers are marginally more optimistic in this regard.

Franchize Consultants note that these figures demonstrate that access to capital, which is a key growth constraint, continues to trouble further development within the franchise sector.

While improving marginally from 5% negative overall sentiment in October 2010 to 3% positive in the latest survey, franchisors expect franchisee recruitment to remain challenging, although perceived access to suitable staff has improved to 25%.

Service providers continue to see a more positive outlook for franchisee and staff recruitment generally with a net 25% and 50%, respectively.

Both franchisors and service providers share a generally positive outlook for finding good locations, where applicable.

Expectations on franchisees, however, are increasingly discouraging. 33% of franchisors expect a positive outcome for franchisee sales levels, while overall 22% anticipate a negative impact on operating costs, and only 5% see profitability improving.

Operating costs are expected to worsen and franchisee profitability narrowly escapes net negative territory overall.

In comparison, service providers remain even less optimistic in their outlook for franchisees generally, with a net 4% expecting franchisee sales levels to improve. 33% expect deterioration in operating costs.

In summarising these figures, Franchize Consultants note that both groups continue to see challenging times ahead for franchised businesses in 2011.

The business advice specialists add that there are clearly substantial challenges ahead for businesses, franchised or otherwise, with the business environment expected to remain uncertain at best.

Further information on the results of the January 2011 Franchising Confidence Survey can be found online.