Franchise Sector Indicator

Franchising holding strong in tough times
Welcome to the 2012 edition of the PwC Private Clients Franchise Sector Indicator. Once again, the survey tells the story of an admirable year of growth for the franchising sector. The survey results tell us that the sector as a whole has recorded double digit growth in both revenue and profits in what has been a challenging year.

The results of the 2012 Franchise Sector Indicator again back up the premise that franchising as a business model, through the support that franchisors provide franchisees, the proven success of the franchisor’s processes and business model; and the increased leverage that franchisee numbers provide in terms of marketing and buying power, generally result in better financial returns.

Highlights

Strong revenue growth recorded

Franchisors maintained double digit growth of ten per cent. This revenue growth was slightly less than anticipated but profit growth, although impressive, was significantly below levels forecast franchisors. These results were recorded during what has been a difficult year and in doing so the franchise sector outperformed the market as a whole.

Robust strategy and franchisee performance key to maintaining growth

Franchise systems achieving growth cited a robust strategy as the key reason. The franchisors we interviewed for this publication provided a similar message. This highlights a need for franchisors to ensure that they have a clearly defined strategy in place that is regularly reviewed to take into account changes in the environment and customer needs.

Franchisors predicting double digit growth

Franchisors are predicting double digit increases for both revenue and profits for the 2013 financial year. Growth forecasts are more conservative than those recorded in previous editions of Franchise Sector Indicator, however still bode very well for another year of strong performance by the sector.

Key challenges are recruitment, economic conditions and funding

Unsurprisingly, economic conditions are seen as a key barrier to meeting growth targets whilst recruiting suitable franchisees remains a key challenge. These findings again highlight the need for robust strategic planning, as well as the ability, commitment and skills to implement the strategic actions, including franchisee recruitment strategy.