Franchise business sentiment plummets as lockdowns escalate

lockdowns, index

As more lockdown measures are being implemented across the country, concerns regarding their impact on the economy are beginning to undermine businesses’ optimism about recovery.

According to the latest Australian Franchise Business Pulse Check survey for the June quarter, pessimism about business conditions in the next six months jumped to 22 per cent in the June quarter from six per cent in the March quarter and 10 per cent in the December quarter. Only 48 per cent of respondents were optimistic (down from 85 per cent in the March quarter) with 30 per cent of respondents neutral about the outlook.

Revenue expectations among businesses also weakened significantly with 45 per cent of respondents expecting a revenue decline, an increase from 13 per cent in the March quarter and 11 per cent in the December quarter.

The survey also noted that the most pressing concerns among the respondents, which consisted of 148 Australian franchise brands covering 23,177 business outlets include the risk of further government lockdowns (84 per cent), availability of suitable employees (55 per cent), wellness of franchisees and support staff (50 per cent) and supply chain issues due to border closures (44 per cent).

Despite these findings, 54 per cent experienced revenue increases exceeding 10 per cent in the June quarter (up from 45 per cent and 33 per cent in the previous two quarters). In particular, those in the health, sport, recreation, and fitness industries experienced increased revenue activity compared to those in the printing and retail food industries, which were more affected by the lockdowns and border closures

The survey also noted that 419 new franchise stores were opened across the brands of 64 respondents, mostly in the home maintenance, retail food and service industries, while 187 franchise stores were permanently closed, especially those in the retail food, services, fitness and automotive industries.

“After four successive quarters, the latest lockdowns and renewed uncertainty have shown a strong negative shift in business sentiment”, Franchise Council of Australia CEO, Mary Aldred, said. “Businesses that are part of a franchise network appear to be outperforming many other parts of the small-medium business sector but they are still dealing with many challenges and are nowhere near their level of revenue pre-COVID.”

The survey also reported that 60 per cent were planning to or were already actively encouraging staff to get vaccinated, even though a majority (43 per cent) were unlikely or had already decided they would not be providing incentives to their staff or network for vaccination, with a further 40 per cent still undecided. Despite the sentiment of some sectors though, 73 per cent say they are not inclined to provide incentives for customers to get vaccinated, with only 3 per cent panning to place restrictions on customers who were not vaccinated.

“The survey shows that franchise businesses are clearly very concerned about not just lockdowns but also the wellness of their support staff and the challenges facing their franchisees,” Aldred concluded.