IFA and FRANdata Unveil First Annual Franchisee Inflation Survey

New data just out reveals how inflationary pressures are impacting franchised businesses. The survey highlights how inflation is having a moderate to significant impact on 90 percent of franchised businesses. The good news is that being part of a franchise system has helped these businesses navigate rising prices. The report was conducted by FRANdata and released by the IFA and finds that the lodging sector, quick-service restaurants, and child-related services are the most impacted by inflation.

“Inflation hurts small businesses, but as prices rise, it helps to be a part of a franchise system,” said Michael Layman, senior vice president of government relations and public affairs for the International Franchise Association. “From receiving supply chain help from their brand, to sharing best practices with fellow franchisees, franchise owners are navigating cost hikes through the supports in their franchise system.”

FRANdata CEO Darrell Johnson added, “Small business owners began signaling inflation concerns in the summer of 2021, and now it’s become a major concern. Inflation challenges are a new experience for most franchise owners, but this survey shows that they benefit during a time of rising costs from being a part of a franchise system.”

The study’s key findings include:

• 90% of franchisees are experiencing a moderate to substantial inflation impact.
• The most impacted sectors include lodging (90%), quick-services restaurants (83%), and child-related services (61%), which report a substantial increase.
• 89% of units have had to raise their prices of goods and services to absorb cost increases.
• 64% of respondents reported lower earnings due to rising prices, with quick-service restaurants, retail stores, and the beauty-related industry being the top three industries to feel the impact on their bottom line. 
• The most significant cost increases are driven by rising fuel prices, increases in labor cost and inventory costs.
• 60% of franchisees expect increases in cost to get worse in near future.
• 92% of franchisees with 11+ units say growth is constrained by labor issues.
• Sharing best practices is one of the biggest advantages of the franchise system during a time of rising prices, followed by customer marketing, buying supplies, and resolving supply chain issues.

The full report and survey findings are available here.