New IFA, FRANdata Study Shows Impact of Labor Shortages on Franchising

First-of-its-kind study shows the availability of qualified labor is the biggest challenge facing small businesses, details how franchising is uniquely equipped to address workforce issues

WASHINGTON, April 7, 2022 – The International Franchise Association (IFA) and FRANdata today released an inaugural annual study on the impact of labor shortages on franchised businesses. Surveying over 200 franchise executives representing 197 brands and approximately 90,000 units, the results show that availability of qualified labor is the number one challenge facing small businesses. The survey also presents the ways franchisors are helping their franchisees address the shortage, highlighting how the franchise business model is uniquely equipped to adapt to today’s challenges.

The full findings are available here. 

“This first-of-its-kind survey of franchise brand executives revealed the biggest problem facing small businesses today is finding qualified labor,” said Michael Layman, Senior Vice President for Government Relations and Public Affairs for the International Franchise Association. “However, the survey further shows the value proposition in franchising – detailing the ways franchise brands are supporting their owners in navigating the very difficult labor shortage, including some of the most innovative strategies used by franchisors to help franchisees improve employee recruitment and retention.” 

“Four out of five franchise systems have experienced labor shortages in recent months,” said FRANdata CEO Darrell Johnson. “While ‘quality of labor’ is the most critical problem facing franchise businesses today, franchising is resilient and strong, as shown in the efforts made to adapt to current labor challenges during the economic recovery. One of franchising’s biggest strengths is the emphasis on extensive training programs that encompass not just technical skills but also career-enhancing fundamental skills.”

The key findings include:

• “Quality of labor” followed by “cost of labor” are the biggest challenges facing franchised small businesses today.
• Nearly all respondents (87.6%) reported franchisees are having trouble finding skilled and unskilled workers.
• 80% of the franchise brands experienced constrained growth due to labor challenges.
• The average number of employees per franchised unit has decreased over the past six months.
• 65% reported employee wages have increased over the past six months, and 66% anticipate wage increases over the next six months.
• The majority of brands have been able to maintain or increase their store operating or production hours over the past six months.
• Most all franchisors are providing assistance to their owners with recruitment and retention.

The ability of franchised brands to address and adapt to the labor shortage shows the resilience of the franchise business model and the impact of having support from a national brand. Some of the strategies franchisors are using to help their franchisees navigate the challenges include: more extensive training, accomplishment recognition, improved recruitment tactics, consistent communication across teams, technological and efficiency advancements, and national hiring campaigns.

As shown in IFA’s 2022 Franchising Economic Outlook, franchising is leading the economic recovery, with an astounding 16.3% growth in economic output in 2021. As the availability of workers improves, the study highlights that franchising will continue to lead the way in economic growth and advancement.

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