A Measured Approach to Franchising in 2024: Preparing for Economic Turbulence

While some are calling for a soft landing in 2024, a recession remains a distinct possibility. For operators, borrowing is likely to remain expensive and capital more difficult to access. Meanwhile, consumers are feeling the squeeze that may force many to look for lower cost solutions to their eating and purchasing habits. Franchisees with value-oriented brands are likely to have a strategic advantage in a cost-conscious environment. 

For the seventh part of our series, we asked two members of the Multi-Unit Franchising Conference’s Board of Directors about their thoughts and plans for approaching business in 2024. Nathan Garn operates a number of Little Caesars, Jamba, Wingstop, Dunkin’, Jersey Mike's Subs, Cinnabon, Red Robin, and Sizzler locations. Sean Falk is a longtime franchisee, who currently operates Scenthound locations.

What is your vision for the economy, the franchise marketplace, and your own business in 2024?

Garn: I’m hopeful but not necessarily optimistic that the Federal Reserve can stick a “soft landing.” I still believe that a recession is the most likely outcome. In the franchise marketplace, consumers are generally going to feel pinched. I expect interest rates to remain elevated compared to recent history. Also, rent and mortgage payments as a percentage of income will likely remain high. I expect consumers to trade down into more cost-effective options. We believe our business is well situated because we operate value-oriented brands.

Falk: I feel like the economy as a whole is going to be pretty tough in 2024. We have a lot of credit card debt and national debt. We've been spending like crazy for three to four years, and something has to give. A presidential election that will certainly get contentious is not going to help. Discretionary spending could become a real issue. Food in franchising probably won't suffer too badly, but some higher-level service needs could be postponed until the economy improves. I anticipate our business will continue to grow, albeit a little slower than we hoped.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? 

Garn: I think debt will remain expensive, and therefore, operators will likely be somewhat more capital constrained. Operators will likely also need to generally lean into value offerings.

Falk: Everyone has been so focused on their business for years now because the margins have really deteriorated. The harder times will require additional focus and creative ways to save revenue. Cost of goods in food, especially, has to stabilize for owners to anticipate and forecast their costs and pricing. Labor will also continue being a costly line item on the profit and loss statement as wages try to catch up with the inflation in pricing that has happened for the last four years.

What are some ways multi-unit franchisees can prepare their businesses for 2024?              

Garn: Be thoughtful about managing major capital investments, lean into investing in their team to better service guests, and increase the value proposition to the guest.

Falk: Have a strategy in advance. It will be too late to address when you are in the middle of a crisis. Make decisions that treat the symptoms now, but prepare yourself for the growth that should come in mid to late 2025. If you can survive now, you will be able to flourish faster and ahead of your peers later.