IFA Survey Shows Increasing Economic Uncertainty

By: International Franchise Association
Published: September 18th, 2024

The International Franchise Association (IFA) released its third Annual Franchisee Survey, in partnership with FRANdata, showing the effectr of continued economic challenges on franchised businesses.

The survey of more than 1,400 franchise owners shows increasing economic uncertainty in the face of increased prices and slowing consumer demand, resulting in lower business earnings in a majority of businesses. The survey also measured franchisee concerns with tax policy ahead of the expiration of many Tax Cuts and Jobs Act provisions next year.

"Even with improvements in the labor market, this year's survey shows that franchisees are still feeling the pain of inflation and continued economic uncertainty," said Michael Layman, IFA senior vice president of government relations and public affairs. "Being a part of a franchise system has helped alleviate some of these concerns, but in today's environment, most franchisees have had to take a hit to their bottom line. IFA will continue fighting for policy solutions that help alleviate cost pressures on both small businesses and their customers—rather than those that will make them worse."

The biggest challenges facing franchisees today are managing costs and inflation as well as slowing customer demand. Key findings from this year's survey include:

• 87% of franchisees are experiencing a moderate to substantial impact from inflationary pressures, consistent with the previous year.
• 65% of franchisees believe costs will further increase in 2025, an increase over 51% last year.
• 86% of franchisees raised their prices to combat cost increases while 80% of franchisees experienced lower earnings in the past year.
• The food industry has been the hardest hit by inflation, followed by personal services and commercial/residential services.
• Labor concerns have eased (47% in 2023 vs. 26% in 2024), but the cost of retaining labor remains high, especially in employee health care.
• Rising expenses for insurance, inventory, supplies, and marketing have driven cost increases.
• Sharing best practices within the franchise network and customer marketing are the most valuable tools for support for franchisees to cope with inflation as compared to not being part of a franchise system.
• While increasing prices is the most common approach to managing rising costs, franchisees have adopted innovative strategies, such as implementing new technology to enhance operational efficiency.

The full results can be found here.

In addition to economic sentiment, the survey measured franchisee awareness of pending tax changes with expiration of many Tax Cuts and Jobs Act provisions at the end of 2025, finding that half of franchisees recognize the significance of the legislation to their business operations. Twenty percent of franchisees reported that the uncertainty surrounding the expiration of the TCJA has affected their business planning.

This year's survey is the third annual survey conducted by FRANdata, an IFA research partner, measuring the impacts of inflation on franchised businesses. The 2022 and 2023 results can be found here and here.

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