The report highlights the ongoing labor challenges encountered by franchise businesses. Concerns of inflation has faded for the businesses, but the cost of borrowing and the slowdown in consumer demand has started to challenge franchises. Significantly, there is a notable increase in budget allocations for technology, innovation, and marketing as well as training and development, crucial for the success of franchise systems. As new joint employment standards loom, franchisors are highly concerned if they have to increase control or reduce support to their franchisees.

Key findings from this year’s survey include:

• 80% of respondents reported that their franchises have unfulfilled job vacancies.
• Inflation, the third leading business challenge, dropped in rank, with only 9% of respondents citing it as their primary concern, down from 20% the previous year.
• 34% of businesses cite the cost and quality of labor as the number one business challenge, but down from 47% in 2023.
• Franchisors are highly concerned that the relationship with franchisees will change due to the National Labor Relations Board’s new joint employer standard, with 74% citing a high-level of concern.
• 81% of the respondents increased wages in the past 6 months, and only 61% are planning to increase in the next 6 months due to ongoing regulatory uncertainty.
• Rising prices, including higher wages, have led to margin compression. Emerging challenges for the year ahead include the cost of financing and weakening consumer demand.

The survey reflects a diverse respondent pool, encompassing 215 brands from 26 different industries with franchise units ranging from less than 10 to over 12,000. Executives from private family-owned systems to platform companies and publicly listed firms contribute to the varied perspectives presented in this report.

Thanks to Paychex for sponsoring this report.