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If you’ve kept a close eye on the news, you’ve likely heard the word inflation stated roughly a dozen times each hour. Inflation is a hot topic in today’s business and consumer worlds alike. If hearing that buzzword on repeat has caused you to feel fearful about entering the world of franchising, you’re in the right place.
Starting a new franchise is a big deal. You’ll have a new source of revenue and added income for your family. You’ll be able to serve your area in a new way, which can help you to feel purposeful. And you’ll have the means to give back to your community. Those are excellent reasons to start a franchise, but hearing inflation news might cause you to drawback and wonder if now is the right time.
To make the best decision for you and your goals, there are a few things to consider when starting a franchise in the face of inflation. In particular, which franchises can comparably withstand the rising cost of goods and services.
What are Current Franchise Owners Facing
The International Franchise Association recently released a report analyzing the franchise industry and inflation's impact this year. Perhaps unsurprisingly, the vast majority of franchises, 90%, have noticed some substantial inflation impact on their business.
While this might seem like a large number, looking deeper at the areas most impacted can help guide you as you decide which franchise to start.
The primary source of higher costs experienced by franchise owners is higher prices of goods and services. Many franchise owners have been able to absorb these higher prices by increasing the amount the consumer pays. However, some franchise owners have accepted that they will have lower margins but kept their pricing low to retain customers.
Which Franchise Industries Tend to Feel the Biggest Impact of Inflation?
The impact of inflation varies greatly across industries. Overall, the industries that are feeling the costs of inflation the most are:
- Quick Service Restaurants (QSR)
- Retail Stores
- Beauty-Related Brands
- Child-Related Brands
- Maintenance Services
In some cases, higher fuel prices and labor costs impact the franchisee more than others. While these are common elements felt across all businesses and households, being part of a franchise has its advantages during times of inflation.
How Franchise Systems Support Franchise Owners In Times Like These
As franchise owners face higher costs, many franchise systems are helping ease that burden for their franchisees. 47% of franchisees said they had experienced some level of support from the franchise system. In the industries that were hardest hit, including retail and child-related franchises, 69% of franchisees said they felt supported by the franchise system.
Some of the ways that franchise owners have helped their franchisees include:
- Sharing best practices
- An increase in customer marketing
- Purchasing supplies
- Helping resolve supply chain disruptions
- Labor recruitment
Coming together as a collective while still operating individually as a franchisee has helped ease many of the hardships felt during this economic backdrop. Franchisees feel more supported than they would if they owned a business independently, which has had a tremendous impact on industries.
If you want to start a business in today’s economic backdrop, opting to lean into a franchise can help get you going faster. And while some industries have been harder hit than others, there are still opportunities waiting for you no matter which direction you choose to take.
Kimberly Crossland is the founder of Roadpreneur and Cruisin' + Campfires, two companies designed to keep families together and living in freedom through travel and entrepreneurship. The goal of both businesses is to inspire meaningful change through the power of a strategic, thoughtful approach to life and business. In her free time, you can find her looking for a new adventure together with her two boys.