Consumers continue to be hit hard by inflation as we see prices skyrocket for a variety of goods. This was especially true in June, when inflation soared to 9.1% with the indexes for gasoline, shelter, and food being the largest contributors (according to the Bureau of Labor Statistics) – marking the fastest pace since November 1981.
These high prices are certainly taking a toll on consumer spending, which will eventually change their restaurant dining habits. This is demonstrated by conflicting restaurant traffic results since last year, showing that traffic in quick-service restaurants (QSR) was down 9.4 percent compared to the same period in 2021, but simultaneously showing that the dine-in channel saw a 2.4-percent increase compared to April 2021.
With restaurants historically one of the first places consumers cut spending in the recession-type environment we could be heading into, this market will impact franchises in unique ways, such as:
- Fluctuating costs of goods: As US food suppliers warn prices will keep climbing, consumers will feel the pain as that cost trickles down.
- Continued supply chain delays: 96 percent of operators are experiencing supply delays or shortages of key food or beverage items in recent months, and eight in 10 say they have faced similar problems with equipment or service items.
- More expensive workers, but hard-to-fill positions: 70 percent of franchise brands are experiencing constrained growth due to labor challenges, and 65 percent report employee wages have increased over the past six months.
So, how can franchisees grapple with continued economic disruptions?
Prioritizing that they have a full view of their finances, along with future projections, is step one. This is most easily achieved by working with an accountant or bookkeeper who provides holistic advisory services via cloud accounting.
Unfortunately, too many small business owners are stuck in antiquated ways of tracking financial success, with a recent global Xero study showing that a whopping 39 percent of small business owners still use pen and paper.
In fact, McDonald’s franchise owner Jennifer Antolin said she transitioned to cloud accounting when growing from two to four franchises. One specific pain point she was looking to address was the process for her profit & loss (P&L) statements, as it became increasingly time-consuming to handwrite the statements on graph paper, have a bookkeeper format them, and then ship them to an accountant at the end of the year. Cloud accounting was necessary not only to boost her efficiency and allow her to become more aware of her access to cash and financial leakage areas, but also enabled her to be in the restaurant with employees – where she wanted to be – not tied to a desk. By working alongside her accountant at BDO Canada,, Jennifer was able to focus on running her restaurants while pulling together plans to open a fifth franchise.
This is just one example of how cloud accounting can allow franchise owners to be nimbler and smarter with their time, particularly during a concerning economy and hostile labor market.
Digitalizing your backend can be scary, but as the economy continues to tread murky waters, franchise owners need to do everything they can to protect themselves for the long haul. Particularly in the restaurant franchise market, which is saturated to begin with, and where only those with the most impactful partners will survive.