Practical Moves to Cut Waste, Retain Staff and Improve Profit Margins
Margins are shrinking. Wages are rising. Supply chains are still unpredictable. Rent and utilities have quietly crept up. And while consumer expectations remain sky-high, their discretionary spending habits have become much harder to predict in a challenging economy.
Welcome to the new normal for franchisees in 2025.
Rising costs aren’t just a temporary hurdle; they are the reality operators must now plan around. While inflation may have cooled slightly compared to the highs of 2022–2023, prices haven’t returned to pre-pandemic levels, and they’re unlikely to. Meanwhile, minimum wage hikes in several states, unionization pressures, and increased benefit costs are fundamentally shifting labor economics for franchise businesses.
So how do franchisees stay ahead? The answer isn’t just to cut costs, it’s to think strategically, optimize relentlessly, and lead proactively.
Here are the three biggest cost categories facing franchisees today — labor, cost of goods sold (COGS), and rent, and what you can do to manage them more effectively.
A Challenging Economy
Minimum wage increases continue to roll out across states and municipalities, with some jurisdictions hitting $18–$20 an hour. At the same time, franchisees are competing for talent not only with each other, but with remote and gig work options that offer greater flexibility.
What this means is simple — labor is now your most valuable investment, and your largest controllable expense.
What you can do:
- Build your schedule based on labor productivity, not just minimum coverage.: Look at sales per labor hour and adjust accordingly. Use your POS and labor management tools to track real-time trends.
- Cross-train your team.: A well-trained, multi-skilled employee can cover multiple roles and reduce your dependency on overstaffing during peak periods.
- Invest in training and retention.: High turnover costs more than high wages. Focus on keeping good people with onboarding, coaching, and recognition programs. Train leaders to lead.
- Rethink your hiring strategy.: Are you fishing in the same pond as everyone else? Get creative: referral bonuses, year-round recruitment, outreach to underrepresented worker pools, and partnerships with schools or training programs.
Cost of Goods Sold (COGS): Supply Chain Volatility Isn’t Over
The supply chain shocks of 2021–2022 may have faded from the headlines, but costs have not returned to stable territory. Ingredients, paper goods, cleaning supplies, and packaging remain volatile, and fuel surcharges still impact deliveries.
The key here is to become both proactive and precise.
What you can do:
- Know your recipe costs to the penny.: Use up-to-date data to analyze actual vs. theoretical food cost. Small errors in prep, portioning, or storage can erode margins fast.
- Cut low-margin items and streamline your menu.: Menu bloat increases food waste, slows the kitchen, and drives up cost. Focus on high-margin, high-volume items.
- Work with your franchisor and vendors on group buying strategies.: Many franchisors can renegotiate pricing or introduce system-wide contracts that benefit all franchisees.
- Train your team on waste reduction.: Every spilled ounce, every over-portioned order, and every expired item adds up. Line-level team members need to understand why this matters.
- Watch your inventory turns.: Overstocking might feel safe, but it increases waste and ties up capital. Understocking leads to missed sales. Aim for balance.
Rent and Lease Agreements: Hidden Pressure Points
Unlike labor and food costs, which can fluctuate day to day, your lease terms are often locked in — and if they aren’t favorable, they can quietly strangle your bottom line over time. Unfortunately, many franchisees sign leases during periods of expansion without negotiating hard enough or building in flexibility for downturns.
In a tight-margin environment, your lease could be the hidden variable holding your profitability hostage.
What you can do:
- Know when your lease is up and start negotiating early.: Many franchisees miss opportunities to renegotiate because they wait too long. Start the conversation 12–18 months before renewal.
- Benchmark your rent.: Is it in line with current market rates for similar concepts in your area? If not, come to the table with data.
- Negotiate based on contribution, not just occupancy.: If your franchise brings consistent traffic or serves as an anchor for a plaza, use that as leverage.
- Ask for help.: If you’re struggling, don’t wait for default. Many landlords will work with you to restructure leases, especially if it prevents vacancy.
Leading Through Cost Pressure: A Shift in Mindset
Managing rising costs in a challenging economy is not just a numbers game. It’s a leadership challenge.
It requires franchisees to shift from being reactive operators to proactive business owners. That means tracking metrics, coaching consistently, forecasting with intention and making bold decisions before you’re forced to.
Here are some additional practices that can help:
- Review your P&L monthly, not quarterly.: Your numbers will tell you where to act — if you’re looking.
- Involve your team in cost awareness.: Make labor and food cost part of the language your team speaks. Share goals, celebrate wins, and train for ownership at every level.
- Collaborate with other franchisees.: Share what’s working. Discuss cost-saving strategies, vendor performance, and staffing ideas. You are not alone.
- Lean into your franchisor relationship.: Ask for tools, insights, and resources. If you’re facing rising costs, others are too—and the best systems are stepping up to help.
Rising costs are not a temporary glitch; they’re part of the new operating environment. But they don’t have to be the end of strong margins or sustainable growth. Franchisees who remain agile, informed, and focused will continue to thrive, even in tough conditions.
Remember: in franchising, consistency is power — but adaptability is survival.
It’s time to sharpen your focus, lead with data, and make cost control part of your daily leadership rhythm.
