It’s been hard to get around the issue of inflation, as it’s become part of the mainstream news conversation on the state of our economy. Though the data shows it reached a four-decade high of over 9% back in June, the overall rate has slowly receded over the past few months. It’s now hovering around 7% – still high, yes – but manageable, nonetheless. Thanks to valued FranNet partner FRANdata, we now know what the impact looks like for franchised businesses.
In conjunction with Gallagher/Franchise Solutions, who sponsored the effort, FRANdata has put out their inaugural 2022 Franchise Inflation Study. As for the respondents profiled, more than 1,000 franchise owners shared their thoughts, and more than a quarter were from one of the three most populous states: Texas, California, and Florida. Here are the rest of the highlights from this intriguing report.
Everyone is Feeling It
In a near-unanimous response, approximately 90% of all survey respondents in the franchising industry reported that inflation had a “moderate to substantial” impact in their businesses. But the effect wasn’t felt equally among all franchising sectors. Those who worked with hospitality/lodging, QSR, and childcare-related businesses felt the impact was greater than other industry channels. Nine in 10 individual businesses reported raising their own prices to combat the effects.
Notable Areas of Impact
As noted by the majority of respondents, inflation was felt in several ways, but the leading area of impact was in rising fuel prices – approximately 70% of business owners shared this opinion, the same of which also reported impacts in labor-related price increases, such as higher wages. Scarcity of inventory was felt by nearly 60% of respondents. At the bottom of the scale was increased utility costs (32%) and rent increases (14%).
Franchise Systems to the Rescue
Nearly half (47%) of all respondents stated that being part of a franchised operation helped mitigate the effects of inflation on their businesses. Nearly one in five (17%) said their franchisor helped out “a lot.” Those who work with retail-related franchise operations were by far the most satisfied with the level of assistance they received (69%), followed by those with childcare-related businesses (54%). Multi-unit owners (54%) felt supported more than single-unit owners (43%). Among the advantages that made the most difference were shared business practices (68%), customer marketing (57%), and bulk supply ordering (42%).
How Brands Helped
The respondents were particularly vocal about the way that their franchisor pitched in to mitigate the factors of inflation. Information sharing (55%), help with employee recruitment (30%), addressing supply chain disruptions (28%), and increased/improved advertising (26%) were among the top actions that respondents appreciated.
Ultimately, more than half of the respondents (60%) believe that things may be challenging near-term, with one in five believing things will stay about the same. And another final note of interest – among multi-unit owners with more than 10 units in their portfolio, a full 59% reported that labor challenges, including a lack of quality candidates, is constraining their growth potential.
The next round of inflationary data is set to be released publicly on Jan. 12, 2023 at 8:30 a.m. ET. You can bookmark this link for future reference. To download your own copy of FRANdata’s 2022 Franchise Inflation Study, simply follow this link, enter your information, and submit.
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