📉 How Tariffs Disrupt Franchising

Protecting your margins amid trade volatility

Author

Chris Wright
April 10, 2025

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🌎 Global Tariffs: The Silent Franchise Disruptor

Franchise leaders are scrambling to respond to the near-daily tariff headlines and market volatility. These trade policies are creating ripple effects throughout franchise supply chains despite not directly touching franchise agreements themselves. This isn't just about politics or economics—it's about protecting your bottom line in real time. Even if you don't import things yourself, these tariffs might be raising your costs through suppliers, building materials, or the stuff your customers see.

Key Highlights:

  • Intellectual property remains protected as current tariffs apply only to tangible goods, not the license agreements at the heart of franchising (good news for your royalty structure!)

  • Supply chain disruptions are the biggest immediate threat, with single-source suppliers presenting the highest risk—especially for build-out materials and operational goods

  • Consumer price sensitivity has franchisors caught between absorbing costs and raising prices in an already inflation-weary market

  • Uniformity challenges are emerging as some franchisees face different cost structures based on their specific supply needs and sourcing

  • International franchise locations may face retaliatory tariffs or even consumer boycotts of American brands in certain markets

👉️ Why It Matters:

In a business model built on consistency and predictable costs, tariff volatility threatens the fundamental franchise value proposition. Smart franchisees are partnering with their franchisors now to develop mitigation strategies—from contract language modifications to sourcing alternatives—rather than waiting for the full impact to hit their P&L statements.

👩‍🍳 Women Leaders Reshaping Restaurant Franchising

Women make up 54% of restaurant employees but own only 34% of restaurants in the U.S. This ownership gap represents one of franchising's biggest missed opportunities. The restaurant world isn't just missing out on numbers—it's missing out on proven leadership strengths. Here's the thing: women are bringing collaborative approaches, inclusive workplace cultures, and customer-focused innovations that drive both employee retention and guest loyalty.

Key Highlights:

  • Franchising offers a lower-risk entry point for women entrepreneurs, providing established systems and support that let them focus on operations and customer experience

  • The honeymoon trap catches many restaurant owners off guard—Kelly Gray of Hot Head Burritos warns most see a 10-50% sales drop after opening excitement fades

  • Location spacing decisions can make or break profitability, with some concepts needing stores 30+ miles apart while others thrive just 5 miles from each other

  • Forward-thinking brands are viewing franchisees as both partners and valued customers, with companies like Hot Head Burritos offering comprehensive training and growth support

👉️ Why It Matters:

In an industry built on hospitality and service, diverse ownership brings diverse thinking—ultimately creating more resilient businesses. For women considering entrepreneurship, franchising offers a proven path with lower barriers to entry and higher success rates than starting from scratch.

🔄 Franchise Rebrands

The biggest names in franchising are getting strategic makeovers—and it's paying off big time. Rebranded companies are seeing average revenue increases of 23%, according to McKinsey.

This isn't just about looking prettier—it's strategic repositioning for the modern market. From Dunkin' Donuts becoming simply "Dunkin'" to The Dwyer Group transforming into "Neighborly," these changes reflect deeper shifts in how franchises approach customer engagement and market differentiation in a rapidly growing business landscape.

Key Highlights:

  • Platform companies are leading the rebranding charge, with umbrella organizations like Empower Brands (formerly Lynx Franchising) creating unified identities for multiple franchise networks

  • Post-pandemic consumer shifts drove 51% of companies to update their branding strategies to better align with changing demands

  • Digital presence optimization is a key driver, with brands seeking more streamlined identities that work across smartphones, apps, and social media

  • Acquisitions and service expansions often trigger rebrands as companies outgrow their original positioning or need to integrate multiple identities

👉️ Why It Matters:

A strategic rebrand can breathe new life into a franchise system, attracting both customers and potential franchisees. For franchisees, being part of a forward-thinking brand that's willing to evolve means staying relevant in an increasingly competitive marketplace.

🥷 The Hidden Franchise Growth Engine

Smart franchisors are paying equal attention to unit transfers while others focus only on new units. Half of franchisors now have programs specifically designed to recruit buyers for transfers/resales.

Key Highlights:

  • 77% of transfers are secured by existing franchisees within the same system, demonstrating the value of internal growth paths

  • 70% of transfers/resales go to completely new franchise buyers, creating a significant recruitment channel

  • Just over half (53%) of franchises include their resale/transfer agreement in their FDD

  • For most systems (89%), transfers account for 10% or fewer of total operating units, but this represents a significant opportunity for strategic growth

👉️ Why It Matters:

As franchise systems mature, effective transfer programs become increasingly crucial for maintaining system health. For prospective franchisees, transfers can offer entry points with established customer bases and proven performance data—potentially reducing initial risk.

✂️ Snippets

🤖 Digital Twins: Franchising's Virtual Secret Weapon

Digital twin technology is revolutionizing franchise operations by creating virtual replicas of physical objects and entire systems. Franchisors are using these AI-powered twins for three game-changing applications: consistent training across all locations, predictive analytics to troubleshoot supply chain issues, and virtual showrooms that let customers interact with products from home. For franchise systems obsessed with consistency, these digital doppelgängers solve the age-old challenge of delivering identical experiences across hundreds of locations. (Source: Franchising.com)

🏠 Home Service Brands Battle Growing Tech and Talent Gap

The franchised home service industry now boasts 523 brands across maintenance (50%), improvement (36%), and restoration (14%) sectors. Despite labor shortages as older workers retire, franchisors are countering with competitive pay, flexible schedules, and tech solutions like Authority Brands' ServiceTitan partnership. With housing stock averaging 47 years old and millennials preferring to outsource rather than DIY, the sector expects 4.9% output growth to $65.2 billion in 2025. (Source: Franchise.org)

🤝 Franchisee-Franchisor Harmony: The Secret Sauce Revealed

"When the franchisee succeeds, so does the franchisor, and vice versa," notes Jamie Stapleton, who operates 8 Scooter's Coffee locations. The consensus among successful operators? Follow the system, communicate regularly, and don't resist change. As Eric Sutterfield puts it after 20 years in franchising: "We don't resist change; instead, we trust that [the franchisor] has done the research." (Source: Franchising.com)

🏢 Federal Layoffs Creating a Franchise Buyer Goldmine

March saw a whopping 275,000 layoff announcements with over 216,000 coming from federal government cuts under the DOGE initiative. The D.C. region alone has seen 278,000 job cuts year-to-date, a staggering 672% increase from last year. This surge represents a potential goldmine of qualified franchise candidates with management experience, financial stability, and a sudden interest in controlling their own destiny. (Source: 1851 Franchise)