Restaurant franchisees struggling with inflation

American restaurant franchisees are still struggling with inflation, as nearly 90% of operators report its ongoing impact, according to the International Franchise Association’s (IFA) annual survey. While costs are beginning to ease, many franchisees are now facing lower customer demand due to higher prices.

A survey which included over 1,400 operators managing more than 8,200 businesses, found that 87% of franchisees across industries are experiencing moderate to substantial effects from inflation. As a result, 80% reported lower business earnings in the past year.  Though franchising remains popular, with over 800,000 franchise locations in the U.S. for the first time. Despite economic challenges, the IFA noted growth across many business lines.

Labor issues, while still significant, have slightly improved, with 26% of operators citing it as their top challenge, down from 47% last year. However, 25% said managing costs and inflation is now their biggest concern, and more operators (22%) pointed to slowing demand compared to 12% a year ago.

Labor costs remain a particular concern for restaurants, with 80% of those surveyed citing labor issues. Both quick-service and sit-down restaurants are feeling the pressure, with 90% of sit-down operators reporting a significant impact from inflation. Many restaurants are raising prices to cope, though this has led to fewer customers as people adjust their spending.