Study Finds Labor Top Issue for Franchising Industry

The International Franchise Association’s (IFA) annual study, “Identifying & Addressing Today’s Labor Trends,” has just been released, and labor tops the list of concerns throughout franchising. This is the second year the study has been conducted and though it shows some improvement in labor market conditions, four out of five franchised brands continue to experience constrained growth due to labor challenges.

“Labor continues to be the most significant issue facing franchised businesses today,” said Michael Layman, senior vice president of government relations and public affairs for the International Franchise Association. “While conditions show improvement, it is clear that franchises are still feeling continued pressure when it comes to finding employees to fill available positions.”

The study was conducted by FRANdata and CEO Darrell Johnson added, “Franchised businesses are enduring a prolonged triple challenge of rising labor, input, and capital costs. This report shows that labor availability remains by far the most important problem of the three for franchise businesses today.”

Here are key findings from the report:

* Availability of qualified labor remains the most important problem facing franchise businesses today.

• -87% of franchisors report their franchisees have had difficulty filling openings for unskilled labor, skilled labor, or both (in comparison with 88% in 2022).
• -In addition, 44% franchisors are reporting few quality applicants to fill the open positions.

* 81% of franchise brands experienced constrained growth due to labor challenges.

* Franchising continues to remain a source of job growth.

• -34% of franchisors experienced an increase in employment, while 45% of franchisors reported unchanged employment numbers.
• -More than half of all franchisors expect total franchised business employment to increase.

* Wage pressure is considerable but lessening.

• -85% of franchised businesses increased wages in the last six months of 2022, and 60% anticipate continued increases in 2023.
• -Over the last 6 months, 43% of franchised businesses reported benefit increases, and 42% anticipate continued increases.

You can view the full report here.