Primed for Engagement: Technology is the Top Strategy for Tackling Labor Challenges

As labor challenges continue to evolve in the franchise sector, franchisors and franchisees must adopt forward-thinking strategies to ensure sustainable growth and operational efficiency. The International Franchise Association (IFA) 2025 Franchisor Survey highlights how franchisors are proactively addressing labor concerns in the years ahead.

The 2025 survey data make it clear that franchisors continue to rely on technology to solve their most pressing issues: labor shortages and workforce management. Sixty-three percent of franchise executives plan to leverage technology to increase revenues and cut costs in 2025, matching the strong focus we saw in 2024.

Franchisors are prioritizing several initiatives:

• Improving operations (more than 60% of respondents in both 2024 and 2025)
• Assisting franchisees with recruiting efforts
• Enhancing employee retention strategies

Additionally, 28% of franchisors specifically mentioned incorporating artificial intelligence (AI) and increased automation to help address these labor issues. For tech vendors offering AI-driven recruitment tools, workforce management platforms, and automation solutions, the franchise market is primed for engagement.

Innovation is accelerating

Capital allocation trends underscore franchisors’ commitment to technology. In 2025, 75% of franchisors expect to increase their capital spending on technology and innovation. 

This increase in investment is consistent across several industries:

• 76% of health and fitness franchisors plan to boost their technology investments.
• 72% of sit-down restaurant franchisors are increasing allocations. This is slightly lower than the 82% seen in 2024.
• 91% of business service franchisors also plan to increase their technology spending.

On the other hand, 56% of child-related franchise brands anticipate keeping their tech budgets flat in 2025, signaling a potential opportunity for suppliers to explore unmet needs in that space.

Emerging trends

Beyond the numbers in the survey, several technology trends are shaping the franchising landscape in 2025:

• AI-driven customer support. Many franchises are rolling out AI-powered chatbots and virtual assistants to provide personalized customer service and streamline processes. These technologies help reduce labor costs and improve customer experience.
• Virtual reality (VR) for franchise development. Some franchisors are using VR technology to create immersive experiences for potential franchisees, allowing them to explore franchise concepts and operations remotely.
• Internet of Things (IoT) and predictive maintenance. IoT devices are being used to monitor equipment in real time, allowing for predictive maintenance that minimizes downtime and extends equipment life.

These technologies are becoming critical tools for franchisors and franchisees looking to improve efficiency and stay competitive.

Advanced tech

Several leading franchise brands are actively adopting advanced technologies to streamline operations, reduce labor dependence, and enhance customer experience.

McDonald’s is undergoing a comprehensive technology overhaul across its 43,000 global locations. The brand is implementing AI-powered drive-thru systems and internet-connected kitchen equipment designed to optimize operations and improve efficiency. This effort is aimed at enhancing the customer experience while reducing the burden on staff, a key strategy as labor challenges persist.

Wendy’s is also taking bold steps in AI adoption. After successful pilot programs, Wendy’s plans to expand its AI-driven drive-thru ordering system at 500 to 600 locations by the end of 2025. The AI technology improves order accuracy, speeds up service, and allows employees to focus on higher-value tasks.

Meanwhile, Yum! Brands, which owns KFC, Taco Bell, and Pizza Hut, has launched Byte by Yum!, a suite of AI-powered software tools. This initiative is transforming the customer journey from mobile and web ordering to kitchen operations and delivery logistics. By investing in AI-driven systems, Yum! Brands is improving efficiency, increasing customer satisfaction, and addressing labor-related challenges.

These brands are setting the standard for technology adoption in franchising, demonstrating how advanced tools can solve workforce issues and create better experiences for franchisees as well as their customers and employees.

The takeaway 

Franchisors are actively seeking technology partners who can offer practical, scalable solutions to their most pressing challenges. Solutions that focus on AI, automation, and data-driven decision-making are in high demand.

Paul Wilbur is the COO of FRANdata, where he is instrumental in building the company’s research and consulting framework. He manages the research, information management, marketing, and IT departments and plays an integral role in the strategic development of FRANdata’s suite of franchise solutions. Contact him at 703-740-4700.

Meme Moy is the director of marketing at FRANdata, where she’s spent more than 10 years shaping the company’s brand and telling its story within the franchise industry. She’s passionate about creating smart, strategic marketing that highlights FRANdata’s expertise and connects with the right audiences, whether that’s franchise brands, lenders, or suppliers.