The Price Hikes Have Begun

Franchises start passing along tariff costs

Author

Chris Wright
April 17, 2025

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đź’° How New Trade Policies Are Drowning Franchise Margins

The latest wave of tariffs—including a hefty 10% on all imports and up to 145% on Chinese goods—has sparked immediate action from businesses large and small. What makes this especially tricky for franchisees? They're often locked into pricing agreements with parent companies while simultaneously facing the full brunt of increasing supply costs.

Key Highlights:

  • Luxury brands are leading the charge. Labucq announced a two-phase 20% price hike, implementing 10% increases on April 15 and May 7 due to EU import tariffs

  • Some businesses are getting political. Dame added an explicit "$5 Trump tariff surcharge" at checkout, directly naming the source of the price increase

  • Flash sales are becoming strategic. Companies like Burlap & Barrel offered 20% discounts ahead of tariff implementation, turning routine promotions into inventory-clearing necessities

  • Consumer stockpiling is accelerating. Shoppers are buying in bulk before prices climb higher, creating short-term sales boosts that could lead to future demand slumps

👉️ Why It Matters:

Franchise owners face a uniquely difficult position in this trade tension—bound by franchise agreements that may restrict pricing flexibility while suppliers demand more for the same goods. This creates a particularly challenging scenario for multi-unit franchisees with thin margins, forcing difficult conversations with both corporate offices and increasingly price-sensitive customers.

👨‍💼 Think You're Too Young for Franchising? Think Again

It used to be that a franchise candidate in their 30s was an anomaly—now it's becoming increasingly common. The traditional franchise buyer is now joined by a new wave of younger professionals seeking early exits from corporate life. As franchising consultant David Busker observed in his recent article, "Job security is dead to me. The era of loyalty is over," is now a common sentiment among younger candidates.

Key Highlights:

  • Busker notes that for much of his career, his typical candidates were Gen X with a few Boomers—professionals in their 50s with kids just out of the house who had reached a plateau in their corporate careers.

  • He now reports that "a substantial portion of my franchise candidates have been getting younger. Rather than professionals in their 50s, I am working with more candidates in their 30s than ever before."

  • Busker cites his most recent candidate to launch a franchise was just 33 years old.

  • While previous generations might stay 6-7 years per company, today's professionals are experiencing much shorter corporate cycles, with one 33-year-old candidate having worked at four companies in just ten years.

  • Barriers to entry in franchising have decreased, opening opportunities for younger entrepreneurs despite potentially having less financial qualification.

👉️ Why It Matters:

This demographic shift represents both an opportunity and a challenge for franchise brands. Systems that adapt their recruitment, financing, and support models to accommodate these younger, tech-savvy entrepreneurs will tap into a vast new talent pool—potentially transforming their growth trajectory.

đź’Ľ Deal or No Deal? Franchise M&A's Perfect Storm

After years of slow activity, franchise M&A is roaring back with a vengeance. Lower interest rates, eager lenders, and aging owners ready to exit have created ideal conditions for both buyers and sellers to make their moves.

Key Highlights:

  • Pent-up demand is driving deals. Many franchise owners who delayed exits during uncertain times are years older and increasingly motivated to sell

  • Money is cheap and plentiful. Reduced interest rates have made financing acquisitions more affordable, while lenders are eager to fund deals after years of limited activity

  • Private equity is hungry. Investors with substantial capital reserves are actively seeking quality franchise acquisitions, intensifying competition

  • Preparation is paramount. Sellers must organize operations, finances, and legal documents to move quickly, while buyers need to streamline operations and secure brand approval

👉️ Why It Matters:

The window for optimal deal-making won't stay open forever. Franchisees considering an exit should act now to maximize valuation while buyers should leverage favorable financing conditions before rates potentially rise again. With experienced advisors and proper preparation, both sides can capitalize on what might be the hottest franchise M&A market in years.

đź“š Why Education Franchises Are the Next Smart Investment

Education franchises are emerging as a compelling opportunity for aspiring business owners. With growing demand for quality education and innovative learning solutions, these franchises offer a combination of financial rewards and meaningful community impact.

Key Highlights:

  • Education franchises operate within established frameworks, offering tested business models that significantly reduce the guesswork and trial-and-error typically associated with new ventures.

  • The sector encompasses diverse educational services including K-12 supplemental education, tutoring, test preparation, language schools, and online learning platforms.

  • Sylvan Learning Center, founded in 1979, now has more than 800 franchises across the United States and Canada, exemplifying successful scaling in this sector.

  • Franchises like Kumon and Huntington Learning Center have built strong reputations by focusing on skill mastery and subject comprehension.

  • Online education franchises have gained particular traction in recent years, with brands like ed2go providing courses for adult learners and professionals seeking career advancement.

👉️ Why It Matters:

Education franchises combine the benefits of proven operational systems with the stability of recurring revenue models, all while serving essential community needs. For entrepreneurs seeking both financial sustainability and meaningful work, education franchises offer a unique value proposition that many retail or food service concepts simply can't match.

✂️ Snippets

🔌 Bridging the Franchise Tech Divide

Most franchise systems struggle with tech alignment: franchisors want control while franchisees need simplicity, creating a disconnect that hampers growth. The problem often starts with vague FDD tech requirements, leading to inconsistent systems and frustrated owners. Brands implementing unified tech solutions are seeing accelerated growth, with one legacy brand expanding from 71 to 110+ stores after streamlining their approach. (Source: FranchiseWire)

🤝 The Rise of Responsible Franchising

The International Franchise Association's recent Responsible Franchising report offers a roadmap for building stronger, more sustainable franchise systems — think of it as relationship counseling for the franchise world. "It's important to stay connected to your 'why' — why you started your business and why you chose to expand through franchising," notes Lisa Linkowsky of Milestone Franchising. Aaron Harper of Rolling Suds adds a dose of reality: "Be clear about what franchisees can expect — including the hours they'll likely need to commit and the investment required before reaching profitability." (Source: FranchiseWire)

đź’§ Liquid Assets: The Hidden Profit Dripping From Your Faucets

Water is an essential, yet often overlooked, expense in everyday restaurant operations — it's literally money down the drain. The EPA estimates restaurants account for approximately 15% of total water use in commercial facilities, with rising water and wastewater service costs adding significant financial pressure over the past decade. Adopting sustainable water practices isn't just good for the planet — it's a direct pipeline to better profits in an industry where every penny counts. (Source: QSR Magazine)

🍕 Slice of Recovery: 77 Pizza Huts Emerge From Bankruptcy

Pizza Hut is serving up a fresh start for 77 restaurants previously operated by EYM Group. According to Nation's Restaurant News, the sale follows EYM's Chapter 11 bankruptcy filing in July 2024, with the company owing more than $21 million to Manufacturers Bank and $2.25 million to Pizza Hut. The drama began with EYM taking legal action against Pizza Hut in March 2024, followed by Pizza Hut's counter-lawsuit and the closure of 15 locations — proving even the biggest franchise systems occasionally get burned. (Source: 1851 Franchise)