IFA Releases Annual Survey on Inflation Impacts on Franchised Businesses

Shows inflation remains a significant problem across sectors; labor remains top driver of cost increases; franchisees expect further pressure

WASHINGTON – The International Franchise Association (IFA) today released its second annual Franchisee Survey, in partnership with FRANdata, showing the impacts of inflationary pressures on franchised businesses. The report shows that while inflation is improving as compared to 2022, it is still having a significant impact on franchised businesses across all sectors with the cost of labor being the biggest driver. The report also highlights a number of ways that being part of a franchise system provides advantages for navigating rising costs.

“Inflation is still a significant challenge for franchised businesses,” said Michael Layman, IFA senior vice president for government relations and public affairs. “This second annual survey shows that while the economic situation is improving, there is still a good bit of uncertainty about what’s to come. Yet through it all, being part of a franchise system helps navigate these challenges and provides more resources for franchise business owners than they would have otherwise.”

This is IFA’s second Annual Franchisee Survey looking at the impacts of inflation, conducted by FRANdata in August of 2023 from nearly 1,300 franchisees nationwide across business lines.

Key findings from the report include:

• 86% of franchisees reported feeling the effects of increasing costs on their operations, a marginal decline from the prior year.
• Nine out of ten business units raised their prices to combat cost increases.
• Three out of the top five industries experiencing the greatest impact from inflation were from the food category.
• Labor remains the most significant challenge for rising costs, followed by insurance costs and cost of inventory. Fuel pressures have eased.
• In line with 2022, businesses are increasing prices of goods and services and observing lower earnings due to inflation. 64% of franchisees are observing reduced business earnings attributable to inflation.
• The percentage of franchisees expressing pessimism regarding future inflation remains elevated, with 51% expecting inflation to get worse.

The full 2023 findings are available here. To compare, the 2022 findings are available here.

In the face of these challenges, franchising has proven to have significant advantages over non-franchised businesses to navigate the pressures of inflation more effectively. These include the sharing of best practices, a supportive network of fellow franchisees, support from the franchisor, and brand reputation.

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