Franchises across the country are feeling the pinch rising costswith 87% reporting that inflation is affecting their bottom line, according to IFA 2024 Annual Franchise Survey. From increasing labor costs to increasing supply prices, franchise owners face significant economic problems.
But amid these challenges, many are finding creative solutions—from leveraging new technologies to adjusting pricing strategies—to keep their businesses afloat. Here's how they're weathering the storm.
Impact on inflation
According to IFA data, inflation has hit franchises hard in 2024, with 87% reporting moderate to severe impacts on their businesses. Eighty percent of franchisees reported lower business profits in the last year. Rising costs in supplies, insurance and other operational expenses particularly affect industries such as the food and personal services, where margins are already tight.
Franchises in these sectors are facing growth the prices for inventory, ingredients and supplies needed, putting pressure on profits. It has been loved by many raise prices or cut services to maintain sustainability, highlighting the significant impact of inflation on their operations.
This inflationary squeeze forces franchise owners to find ways to offset costs, such as streamlining operations and introducing technological innovations.
Related: See Entrepreneurs 2024 Top franchise suppliers LIST
Work challenges
While labor shortages are beginning to ease — 47% of respondents cited employment as a significant challenge in 2023 versus 26% in 2024 — franchises are still facing high retention costs, particularly in providing care benefits health and maintaining competitive wages, the IFA study found.
Even with a larger pool of potential employees, compensation remains an important challenge. Many franchise owners find that balancing competitive wages with rising operational costs is a tightrope, and inflationary pressures exacerbate the pressure to retain staff.
In addition to health care, rising expenses for inventory, supplies and marketing have driven up costs. The food sector has been hit hardest by inflation, followed by personal services and commercial/residential services.
Franchisees adapting
The IFA study found that franchisees are responding to these challenges with various innovative strategies. Many are turning to technology to cut costs, such as automating administrative tasks, introducing self-service kiosks or leveraging data analytics to improve operations.
Franchise networks are also sharing best practices, from adjusting pricing strategies to buying supplies in bulk to offset inflationary pressures. Some franchisees have been able to pass on price increases to consumers, while others are focusing on optimizing operations to stay profitable.
