Franchisees and franchisors will find trading conditions tough over the next 12 months in New Zealand despite a positive outlook. The good news is that 66 percent of franchisors expect sales levels for franchisees to increase over the next year.

The inaugural quarterly survey released by Franchize Consultants, Franchising Confidence Index, shows concerns for the industry are increased operating costs for franchisees, franchisee profitability, and lack of confidence in the economy from franchisee prospects.

While franchisors are confident about general business conditions, their own growth prospects, availability of suitable locations, and strong sales levels for franchisees, access to funding, availability of suitable staff and increasing franchisee operating costs are concerns.

Only 20 percent of franchisors expect better operating costs for franchisees, but just four percent of service providers (banks, accountants, lawyers, consultants) agree, 56 percent predicting a deterioration in the costs of running a franchise.

Franchisors showed confidence too in franchisee profitability levels with 56 percent believing these will be higher over the next 12 months. This is countered however by the view of service providers that franchisee profits will be at best the same (64 percent) with just 12 percent confident in increased profit levels.

The data and analysis represents the views of 40 franchisors and 24 service providers in a survey of 300 New Zealand franchisors and 90 specialist providers at the end of March 2010.