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Inflation has been hitting all businesses so hard lately. But franchise operators have been struck especially hard by these non-stop rising costs and shrinking profits.
Inflation has been hitting all businesses so hard lately. But franchise operators have been struck especially hard by these non-stop rising costs and shrinking profits.
Some days, this prolonged inflation squeeze makes you want to just chuck in the towel and be done with the whole franchise journey.
Yes, the challenges inflation throws your way are massive. But the opportunities to power through by going digital with your franchise are even bigger.
In this post, we are going to see how bad inflation affects the restaurant landscape and how digital solutions like DYNE keep your dining business thrive!
According to a major survey by the International Franchise Association (IFA), a whopping 87% of franchise owners say inflation is impacting them moderately or substantially. That's almost 9 out of 10! This prolonged inflationary pressure has been no joke.
And unfortunately, this isn't just a tiny blip or speed bump. A massive 80% of franchisees told the IFA that their total business earnings have declined over the past year as costs continue ballooning higher and higher. That's a huge hit to your bottom line!
For you restaurant franchise owners, it's an especially dire situation. Over 80% of restaurant franchises are struggling majorly to hire and retain enough workers.
Between labor shortages and skyrocketing supply costs, profit margins are getting thinner by the day. I know you've tried raising menu prices to keep up, but customers are stretched thin too and simply aren't willing to pay more right now.
You're stuck between the rock of surging costs and the hard place of customers' constrained budgets. It's a vicious cycle!
With everyone's wallet stretched thinner and thinner by inflation lately, customers are on the hunt for maximum value however they can find it. Many have pulled back their spending at restaurants, retail franchises, and other businesses. They're searching high and low for the best deal in town.
This means you franchise owners are now locked in an intense, all-out price and value war with competitors and even fellow franchisees! It's an ugly race to the bottom as you all try to drastically undercut each other on price, deals, discounts, and giveaways just to get customers in the door.
Believe me, I know you want to avoid participating in this value war at all costs. Slashing prices like this decimates profit margins across the whole franchise system. But sometimes it feels like the only way to get those customers and sales you desperately need.
Even worse, this environment of deep discounting trains customers to only care about the lowest price, not your great brand, excellent service, and unique experiences.
I know your franchise has so much more to offer than just bargain basement prices! But you feel trapped fighting in this value trench warfare.
The latest IFA survey put the challenges in plain terms: Fully 25% of franchise owners called managing costs and inflation their #1 critical issue right now, up from 21% who said that just a year ago. And meanwhile, 22% said declining demand is their top major headache - that's double the number from the previous year!
You restaurant franchise owners are on the front lines of this battle every day, dealing with higher wages, volatile food costs, supply shortages, and customers simply dining out less and less. My heart goes out to you - I know you need solutions ASAP before inflation completely devours your profit margins!
Many franchisees had hoped inflation would fade quickly and things would stabilize. But now it's abundantly clear that costs will remain painfully high for the foreseeable future. Simply raising prices across the board or passively waiting it out are not viable strategies anymore.
Here's the good news - going digital provides franchises with superpowers to adapt and even flourish in this high inflationary environment. New technologies can help you substantially slash costs, deeply understand customers, creatively boost promotions, and uncover fresh growth pathways.
Deploying the right digital solutions will let your franchise leap right over all those inflation hurdles! Let me break down some of the most impactful ways digital can strengthen your franchise:
When rampant inflation drives up business operating costs from every direction, digital tools and solutions help streamline workflows to slim down expenses across the board.
Automating repetitive mundane tasks, better coordinating staff and inventory, optimizing inventory orders based on demand forecasts - these are just a few examples of how technology-powered solutions can create real cost savings.
For you restaurant franchise owners, tech-enabled tools let you closely align labor schedules to match sales patterns, avoiding expensive overstaffing. Inventory management analyzes purchasing trends and waste data, so you pay less for food costs and waste less.
With customers fiercely hunting for the best value they can get amid declining discretionary budgets, digital capabilities give you priceless info into changing consumer behaviors and preferences.
Advanced analytics tools can detect even micro-trends in demand shifts, menu item popularity, foot traffic patterns, and much more. You gain visibility that simply wasn't possible before.
You can also monitor real-time brand sentiment and conversations on social media to spot concerns or opportunities. With these rich customer insights, you can rapidly identify new value opportunities and tailor promotions, menus, and experiences to exactly match their changing needs.
In inflationary times, crafting promotions and deals that balance providing consumer value and protecting franchise profits is an absolute must, but also a huge challenge.
Fortunately, digital promotion capabilities make this much easier to accomplish with precision! Advanced tools allow you to create targeted email offers, social media ads, and other incentives to retain customers without resorting to broad, deep discounts that crush profit margins.
Digital menu management platforms empower you to dynamically optimize pricing on each item to maximize revenue. Bundling high-margin items while minimizing discounting on anchor products helps entice customers while insulating profits. Hour-by-hour dynamic pricing balances demand signals and profit for the changing situations throughout the day.
The bottom line is you now have the power to carefully incentivize customers, without decimating your margins across the board. You can avoid participating in the race-to-the-bottom value war!
Even with all the intense economic challenges lately, franchising as a business model is still growing like gangbusters!
That's right, franchising hit a new high-water mark last year of over 800,000 total franchise units across the country. That's an all-time record! The IFA says tough economic times often get even more people interested in pursuing proven franchising opportunities. Franchises have key advantages over independent small businesses in volatile economic climates.
Of course, this inflationary surge is a different animal from past recessions. You simply can't rely on the old recession playbook of just waiting it out, cutting costs, and riding it through until conditions improve again.
But as a group, franchises have tremendous resilience, and I'm confident you have what it takes to power through this crisis by fully embracing digital transformation!
Inflation poses complex interlocking challenges, no doubt. But advanced digital solutions turn all that complexity into opportunity!
Platforms like DYNE put the power of data and technology directly into your hands as a franchisee.
We can optimize your operations, understand customers, enhance promotions, and uncover new growth pathways - your digital ticket to emerging even stronger from inflation!
Consider partnering with other non-competing franchise brands to share space in a ghost kitchen. This reduces your capital expenditure while allowing experimentation with new digital-only menu concepts and offerings. Use the shared Order data to determine which virtual concepts show the most promise before committing to a standalone buildout.
Customer analytics can identify when and how each customer uses your loyalty program most. Use these insights to tailor promotional offers to fit their unique habits. For instance, offer a families discounts during weekday dinner times when they typically visit, or target young professionals with late-night discounts matching their ordering habits.
Workforce management systems factor in historical sales data, weather, local events, and other signals to accurately forecast labor needs by hour. They can also optimize schedules based on individual staff skills and availability. Together, this reduces overstaffing and keeps labor aligned tightly to demand.
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