Labor Shortage Remains Top Concern to Local Franchise Businesses
New IFA study on labor trends in franchising shows slight improvements from 2022, but availability of qualified labor remains number one challenge for franchised businesses; growth still constrained due to labor shortage
WASHINGTON – The International Franchise Association (IFA) today released its annual 2023 study on labor trends in franchising, showing that the availability of qualified labor remains the number one challenge facing franchised businesses today. In this second inaugural study, conducted by FRANdata, the survey shows slight improvement in labor market conditions, but four out of five franchised brands continue to experience constrained growth due to labor challenges.
“Labor continues to be the most significant issue facing franchised businesses today,” said Michael Layman, senior vice president of government relations and public affairs for the International Franchise Association. “While conditions show improvement, it is clear that franchises are still feeling continued pressure when it comes to finding employees to fill available positions. Through the challenges, the franchise system has shown its proven advantages to help franchisees address the shortage and continue their growth.”
“Franchised businesses are enduring a prolonged triple challenge of rising labor, input and capital costs,” said Darrell Johnson CEO of FRANdata. “This report shows that labor availability remains by far the most important problem of the three for franchise businesses today and franchisors continue to develop innovative strategies to help owners compete for people on Main Street.”
The key findings from the report, “Identifying & Addressing Today’s Labor Trends,” include:
- Availability of qualified labor remains the most important problem facing franchise businesses today, continued from 2022.
- 87% of franchisors report their franchisees have had difficulty filling openings for unskilled labor, skilled labor, or both (in comparison with 88% in 2022).
- In addition, 44% franchisors are reporting few quality applicants to fill the open positions.
- 81% of franchise brands experienced constrained growth due to labor challenges, continued from 2022.
- Franchising continues to remain a source of job growth.
- 34% of franchisors experienced an increase in employment, while 45% of franchisors reported unchanged employment numbers.
- More than half of all franchisors expect total franchised business employment to increase.
- Wage pressure is considerable but lessening.
- 85% of franchised businesses increased wages in the last six months of 2022, and 60% anticipate continued increases in 2023.
- Over the last 6 months, 43% of franchised businesses reported benefit increases, and 42% anticipate continued increases.
Franchising is unique in that individual business owners have a stronger network of support – both from their brand and other franchisees to address today’s labor challenges. Franchisors have taken a number of actions to help their franchisees, including:
- Providing more resources and hiring corporate recruiters to assist franchisees in recruitment
- Creating a “Recruiting Fund” to pool resources for all franchisees
- Additional investments in digital and social media advertising to help drive applicants
- Streamlining the system for posting, applicant processing, and automated applicant process
- Giving royalty rebates for hiring of sales staff
- Testing AI job boards
According to Oxford Economics, franchised businesses on average pay up to 3.4% higher wages than their non-franchise counterparts. More than 65% of franchise workers are offered health insurance, a greater proportion than among small establishments in general, and more than three-quarters of franchise workers (76%) are offered vacation, holiday, and sick leave.
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About the International Franchise Association:
Celebrating over 60 years of excellence, education, and advocacy, the International Franchise Association (IFA) is the world’s oldest and largest organization representing franchising worldwide. IFA works through its government relations and public policy, media relations, and educational programs to protect, enhance and promote franchising and the approximately 790,492 franchise establishments that support nearly 8.4 million direct jobs, $825.4 billion of economic output for the U.S. economy, and almost 3 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in over 300 different business format categories, individual franchisees, and companies that support the industry in marketing, law, technology, and business development.