Franchising Trends To Be On The Lookout For In 2023

by Patrick Galleher, originally published on Forbes.com on Janurary 5, 2023

With the economy looking to be as uncertain as ever in 2023, the franchising industry is likely to experience continued challenges, as well as many changes.

But not all is grim. While supply chain shortages are expected to persist, there will also be plenty of sector growth and new consumer habits that can positively impact businesses. Here are some key trends expected to shake up the franchising industry in the year ahead:

Bringing Supply Chains Closer To Home

Outsourcing is a common business practice, as historically, cheaper labor and materials have made it an attractive strategy for those looking to save on operational costs.

These days, things have changed. Between geopolitical risks, unrest and ongoing Covid-19 shutdowns, the number of franchisors basing their supply chains overseas is dropping.

Instead, more companies are moving their supply chain domestically or closer to the United States, such as in Mexico.

More White-Collar Employees-Turned-Franchisees

With an economic downturn comes plenty of layoffs. As more white-collar employees find themselves out of work, they’ll be seeking new opportunities.

During the 2008 recession and the 2020 Covid-19 pandemic, many employees decided to leave the confines of corporate America to become their own bosses. They combined their corporate backgrounds with the proven systems and support that franchises offer to achieve success. These factors point to history potentially repeating itself in 2023.

Big Growth For Lower Investment, Essential Franchises

One of the biggest reasons people turn to franchising is because of its stability. More aspiring entrepreneurs are looking for resilient business opportunities that offer substantial returns.

For those offering essential products and services, 2023 could bring a plethora of eager franchisees looking to capitalize off a business with consistent demand. With more economic uncertainty ahead, aspiring entrepreneurs are looking for lower-risk investments with proven models, brand recognition and a focus on innovation.

Prospective franchisees will do their due diligence to ensure they’re making a smart investment, so franchises should be highlighting their unique, dependable factors, including areas of support, how they stayed afloat through the pandemic and any steps they’re taking to indulge in the latest consumer trends.

This also means franchisors can offer more flexible investment options, both in terms of financing and nontraditional, smaller-footprint models that will allow franchisees a lower investment, saving on the operational costs of a full-scale model. The number of franchisors and franchisees capitalizing off nontraditional locations has risen steadily in the past few years. Nontraditional locations give new franchisees a chance to “get their feet wet” before diving into full-scale models.

They also help combat the labor shortage, as smaller models located in airports, sports stadiums and so on typically have shorter hours and require fewer employees to operate. In other words, many see it as a “safer investment” to test the waters with a franchisor.

Reducing Costs And Pricing Accordingly

As inflation continues and the cost of goods increases, franchises are already taking proactive steps to remain profitable in the new year.

Much like when the pandemic began, one of their top priorities will be to cut down on operational costs—from labor to inventory.

Part of this strategy may include bulk ordering what they can or locking in pricing with vendors and suppliers. Of course, the other half of the equation includes increasing prices for customers.

Simple Operations And Smart Staffing

Between the ongoing labor shortage and cost management, more prospective franchisees will be looking to invest in businesses with smart staffing strategies. This includes franchises that take fewer employees to operate and those with advanced technology to reduce the number of employees needed.

Plus, as e-commerce continues to thrive, retail franchises may require fewer in-store employees and more behind-the-scenes options.

An Immersive Customer Experience

Though franchising is a dependable pathway to success, it is still a competitive space. A recent report states that 30% of customers are willing to pay for more excellent service—and these days, with prices on the rise, customer experience matters like never before.

In 2023, franchises will continue to invest in the parts of their business that promote a unique and convenient customer experience. Mobile apps, artificial intelligence and contactless options are just a few of the trends taking the customer experience to a whole new level.

Practicing Sustainability

Today, customers are prioritizing sustainability like never before, with the two largest consumer groups—Millennials and Gen Z—leading the way.

In 2023, many franchisors are likely to roll out green initiatives to cater to this growing number of eco-friendly consumers, which may include changes in their packaging, new programs and incentives.

They may also position sustainability as a core value within their marketing and branding and potentially enhance eco-friendly efforts.

Preparing Your Business For A Volatile Year

Luckily, there are plenty of steps businesses can take to prepare for the year ahead within their operations, marketing, leadership and more. Invest time into your business strategy on a regular basis. As a franchisor, your strategy should encompass consumer and franchise development.

Different things will appeal to different audiences. Your consumers may be more focused on your unique products and services, sustainability efforts and the experience you offer, while prospective franchisees will care about your returns, support system and how you’re helping them combat supply chain and staffing obstacles.

Be sure to highlight these efforts in your marketing strategy—from strong vendor relations to your leadership and support teams, to flexible models and historic reliability during the pandemic and times of economic uncertainty. Many of the factors franchisees look for are the ones private equity firms seek out when purchasing companies—so no matter where the future of your franchise is headed, they are a vital focus.

New Year, New Opportunities

When one door closes, another one opens. Though 2023 may present new challenges, it clears the path for career and life-altering decisions and investments. As the competitive landscape heats up and more emerging brands come into play, aspiring entrepreneurs will be on the lookout for the stability of essential and resilient franchising opportunities.