July 2012 Quarter ResultsFRANCHISING OUTLOOK POSITIVE, BUT REDUCED. FUNDING STILL

AVAILABLE FOR SOLID FRANCHISEE PROPOSITIONS

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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 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)

Special Additional Focus

FUNDING –RELATED QUESTION

1. Thinking about my own franchise network, I believe a solid franchisee proposition is just as likely to be funded by one of the main banks as it once was

2. I believe the growth of my franchise network is ‘not’ being constrained by access to bank funding for new franchisees

3. I believe that there may be more that my franchise network can do to make my system more fundable

4. I am interested in learning more about how my franchise system could become more fundable

Respondents select their level of agreement with each statement: Strongly Agree, Agree, Neutral, Disagree or Strongly Disagree.

Note: Service providers were also asked for their views on the first three statements from a broader 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 Questions

Surprisingly, franchisor respondents mostly agreed that funding has not changed due to the tough economic climate, with 27/41 (66%) indicating either Strongly Agree or Agree.

This sentiment was largely mirrored by service providers, with 13/19 (69%) indicating Strongly Agree or Agree to the aligned statement ‘I believe a solid franchisee proposition is just as likely to be funded by one of the main banks as it once was.’

The Results: Special Funding Questions

Franchisor respondents mostly agreed that their respective franchise network’s growth was not being constrained by access to bank funding for new franchises. A solid 61% reported either Strongly Agree or Agree with this statement.

Service providers were somewhat supportive of this view, with 10/19 (53%) noting Strongly Agree or Agree to the statement ‘I do not believe the growth of New Zealand franchising is being constrained by access to bank funding for new franchisees.’

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.biz