Franchisor business confidence lifts, despite concerns over staffing challenges, latest survey reveals

By Sarah Stowe | 06 May 2022 View comments

Franchisors are overwhelmingly optimistic about business conditions over the next six months, according to the latest industry survey.

The percentage of businesses feeling optimistic about business conditions in the next six months remains solid at 72 per cent. Only 6 per cent of respondents were pessimistic about upcoming trade.

The March 2022 Australian Franchise Sector Pulse Check Survey reveals a rise in expectations of franchisee profitability. Up from 50 per cent in December, in March 71 per cent of respondents expected more than 95 per cent of their franchisees to make a profit in the March quarter.

While hospitality remains the most affected sector there was a fall in the number of respondents expecting more than 25 per cent of franchisees to record losses. It was down to 7 per cent from 15 per cent (December) and 30 per cent (September).

Franchise Council of Australia CEO Mary Aldred said “Franchised businesses continue to outperform many others in the small-medium business sector and their optimistic outlook indicates they’re likely to continue to lead the sector throughout 2022.”

Positive sentiment

This quarterly survey is conducted by FRANdata for the Franchise Council of Australia.

FRANdata Australia CEO Darryn McAuliffe told Inside Franchise Business Executive “Improved trading performance over recent quarters and a continued positive forward sentiment seem to be underpinning clear expansion plans across most franchise networks”.

According to the survey responses, within the next 12 months expansion is most likely in New South Wales (42 per cent). Thirty five per cent of respondents are planning significant growth in Victoria.

Just 14 per cent of respondents cite Queensland as a strong growth area. For 38 per cent of franchisors it has remained the strongest performing region over the past 12 months.

Over the next year the sector is likely to grow by 888 franchised outlets. Of these, 57 per cent are likely to need access to finance, the respondents reported.

Once again though staffing issues top the list of franchisor’s operational concerns.

“The anticipated expansion of networks and new outlets is a terrific indicator but obviously the availability of suitable workers is still a big challenge,” said Aldred.

Sixty four per cent of respondents (marginally lower than 73 per cent in December but higher than the 55 per cent in the previous two quarters) see employment issues as a major problem.

McAuliffe said “This staffing challenge has the threat to hold back both the growth aspirations and the recovery of individual small businesses.”

Openings and closures

In the March quarter a total of 520 new outlets were opened across the brands of franchisors who participated in the survey. Openings were strongest in home services and the food sector (particularly QSR)

In contrast 149 outlets were permanently closed, predominantly retail stores.

The survey also showed many franchises experienced significant disruption during the Queensland and New South Wales floods in March 2022.

More than 20 per cent of respondents revealed that at least 10 per cent of their outlets had experienced interruption to trading. The average period those business were unable to trade ranged from one or two days (37 per cent) to more than four weeks (5 per cent). Most impacted businesses (46%) were unable to trade for 3- 7 days due to flood related interruption or damage.

The March Quarter 2022 survey included responses from 122 Australian franchise brands covering 17,057 individual business outlets (16,233 franchised and 824 company operated) and employing 123,851 Australians.