A Measured Approach to Franchising in 2024: Preparing for Economic Turbulence

By: Kerry Pipes | 4,513 Reads | 23 Shares

%3Cp+dir%3D%22ltr%22%3EWhile+some+are+calling+for+a+soft+landing+in+2024%2C+a+recession+remains+a+distinct+possibility.+For+operators%2C+borrowing+is+likely+to+remain+expensive+and+capital+more+difficult+to+access.+Meanwhile%2C+consumers+are+feeling+the+squeeze+that+may+force+many+to+look+for+lower+cost+solutions+to+their+eating+and+purchasing+habits.+Franchisees+with+value-oriented+brands+are+likely+to+have+a+strategic+advantage+in+a+cost-conscious+environment.%26nbsp%3B%3C%2Fp%3E%0D%0A%3Cp+dir%3D%22ltr%22%3EFor+the+seventh+part+of+our+series%2C+we+asked+two+members+of+the+Multi-Unit+Franchising+Conference%26rsquo%3Bs+Board+of+Directors+about+their+thoughts+and+plans+for+approaching+business+in+2024.+Nathan+Garn+operates+a+number+of+Little+Caesars%2C+Jamba%2C+Wingstop%2C+Dunkin%26rsquo%3B%2C+Jersey+Mike%27s+Subs%2C+Cinnabon%2C+Red+Robin%2C+and+Sizzler+locations.+Sean+Falk+is+a+longtime+franchisee%2C+who+currently+operates+Scenthound+locations.%3C%2Fp%3E%0D%0A%3Ch2+dir%3D%22ltr%22%3EWhat+is+your+vision+for+the+economy%2C+the+franchise+marketplace%2C+and+your+own+business+in+2024%3F%3C%2Fh2%3E%0D%0A%3Cp+dir%3D%22ltr%22%3E%3Cem%3EGarn%3A%3C%2Fem%3E+I%26rsquo%3Bm+hopeful+but+not+necessarily+optimistic+that+the+Federal+Reserve+can+stick+a+%26ldquo%3Bsoft+landing.%26rdquo%3B+I+still+believe+that+a+recession+is+the+most+likely+outcome.+In+the+franchise+marketplace%2C+consumers+are+generally+going+to+feel+pinched.+I+expect+interest+rates+to+remain+elevated+compared+to+recent+history.+Also%2C+rent+and+mortgage+payments+as+a+percentage+of+income+will+likely+remain+high.+I+expect+consumers+to+trade+down+into+more+cost-effective+options.+We+believe+our+business+is+well+situated+because+we+operate+value-oriented+brands.%3C%2Fp%3E%0D%0A%3Cp+dir%3D%22ltr%22%3E%3Cem%3EFalk%3A%3C%2Fem%3E+I+feel+like+the+economy+as+a+whole+is+going+to+be+pretty+tough+in+2024.+We+have+a+lot+of+credit+card+debt+and+national+debt.+We%27ve+been+spending+like+crazy+for+three+to+four+years%2C+and+something+has+to+give.+A+presidential+election+that+will+certainly+get+contentious+is+not+going+to+help.+Discretionary+spending+could+become+a+real+issue.+Food+in+franchising+probably+won%27t+suffer+too+badly%2C+but+some+higher-level+service+needs+could+be+postponed+until+the+economy+improves.+I+anticipate+our+business+will+continue+to+grow%2C+albeit+a+little+slower+than+we+hoped.%3C%2Fp%3E%0D%0A%3Ch2+dir%3D%22ltr%22%3EIn+what+ways+do+you+think+this+will+impact+multi-unit+franchisees+and+their+business+operations+in+the+coming+year%3F%26nbsp%3B%3C%2Fh2%3E%0D%0A%3Cp+dir%3D%22ltr%22%3E%3Cem%3EGarn%3A%3C%2Fem%3E+I+think+debt+will+remain+expensive%2C+and+therefore%2C+operators+will+likely+be+somewhat+more+capital+constrained.+Operators+will+likely+also+need+to+generally+lean+into+value+offerings.%3C%2Fp%3E%0D%0A%3Cp+dir%3D%22ltr%22%3E%3Cem%3EFalk%3A%3C%2Fem%3E+Everyone+has+been+so+focused+on+their+business+for+years+now+because+the+margins+have+really+deteriorated.+The+harder+times+will+require+additional+focus+and+creative+ways+to+save+revenue.+Cost+of+goods+in+food%2C+especially%2C+has+to+stabilize+for+owners+to+anticipate+and+forecast+their+costs+and+pricing.+Labor+will+also+continue+being+a+costly+line+item+on+the+profit+and+loss+statement+as+wages+try+to+catch+up+with+the+inflation+in+pricing+that+has+happened+for+the+last+four+years.%3C%2Fp%3E%0D%0A%3Ch2+dir%3D%22ltr%22%3EWhat+are+some+ways+multi-unit+franchisees+can+prepare+their+businesses+for+2024%3F%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%26nbsp%3B%3C%2Fh2%3E%0D%0A%3Cp+dir%3D%22ltr%22%3E%3Cem%3EGarn%3A%3C%2Fem%3E+Be+thoughtful+about+managing+major+capital+investments%2C+lean+into+investing+in+their+team+to+better+service+guests%2C+and+increase+the+value+proposition+to+the+guest.%3C%2Fp%3E%0D%0A%3Cp+dir%3D%22ltr%22%3E%3Cem%3EFalk%3A%3C%2Fem%3E+Have+a+strategy+in+advance.+It+will+be+too+late+to+address+when+you+are+in+the+middle+of+a+crisis.+Make+decisions+that+treat+the+symptoms+now%2C+but+prepare+yourself+for+the+growth+that+should+come+in+mid+to+late+2025.+If+you+can+survive+now%2C+you+will+be+able+to+flourish+faster+and+ahead+of+your+peers+later.%3C%2Fp%3E

Published: January 6th, 2024