New International Franchise Association Report Shows Inflation is Negatively Impacting 90% of Franchised Businesses

September 15, 2022

First annual franchisee inflation survey, conducted by FRANdata, shows being part of a franchise system helps navigate a time of rising prices; lodging, quick-service restaurants, and child-related services most impacted

WASHINGTON – The International Franchise Association (IFA) today released its first annual survey on the impacts of inflationary pressures on franchised businesses. The survey, conducted by FRANdata, revealed that inflation is having a moderate to significant impact on 90 percent of franchised businesses, but being part of a franchise system has helped these businesses navigate rising prices. The report shows 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.”

“Small business owners began signaling inflation concerns in the summer of 2021, and now it’s become a major concern,” said Darrell Johnson, CEO of FRANdata. “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.”

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.

The survey, conducted in July and August 2022, comes immediately following the August inflation report showing record high rates of inflation.

The survey includes responses from over 1,000 franchise owners from various lines of business all across the United States.

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