What challenges will franchise owners most likely face in 2025? Many industry experts say to expect continuing challenges involving inflation and food prices, while others speculate employment and worker wages will be areas of concern.

When it comes to navigating these challenges and protecting your business, insurance and risk management can play a key role. Here’s what to know.

Inflation and Food Prices

Overall, national data shows general inflation moderating. In 2025, expectations are for an annual rate between 2.5–2.6%. But that picture could look different for your particular segment of the industry. About two-thirds of franchises are preparing for further cost increases over the next year. And most say they’re already experiencing moderate or greater pressures from inflation.

For some franchises, one place these costs tend to be reflected is in food prices. Inventory and supply costs are up, which can quickly have an effect on the price point of products sold. At the same time, less directly related franchise costs can also ultimately impact the price of food, such as:

  • Labor
  • Marketing
  • Utilities
  • Leasing
  • Credit
  • Insurance

Inflation and Food Price Risk Management

There are a few things to keep in mind when it comes to managing the risks of business costs and your food prices. Since these cost pressures are most directly tied to your inventory and supplies, it makes sense to review your property coverage of these assets. Make sure you are aware of the amount you’re covered for, and that it is the correct amount. You don’t want to create a risk exposure with too little coverage to protect you in a claim scenario or have too much coverage such that you are overpaying for coverage you don’t need.

Advertising risks can also enter the picture in these situations. Ensure that pricing displays are accurate and that advertising for any deals or value options fairly represents the discount being offered. This can help minimize the chance of false advertising claims.

Also, be wary of foregoing necessary insurance coverages and adequate limits in an effort to cut down on expenses. If you were to have a significant claim, a gap in coverage could leave you shouldering those claim expenses yourself. These costs, including legal fees, judgments, fines and penalties, are also being impacted negatively by inflation, making adequate protection all the more important. Work with a seasoned insurance expert to ensure essential coverages are in place, and speak up if you have cost concerns. There are usually solutions available to strike a balance between coverage and cost.

Employment and Worker Wages

In every business cycle, there comes a point where some pundits will lament, “No one wants to work.” But such employment challenges are more often related to issues of supply and demand, where the wage demands of the most reliable employees outpace the operational feasibility of most employers to meet them.

In 2025, franchisees face pressures from both sides of the wage issue. The federal minimum wage floor has remained fixed at $7.25 per hour since 2009. Yet 15 states plus Washington, D.C. have now passed legislation raising the hourly minimum wage to $15 or more. As of January 1, 2025, Washington State assumes the place of the highest minimum wage in the country, at $16.66 per hour, and the floor is rising in other states. On the other hand, expectations of workers are also rising. Nationwide, the average hourly wage is $30.62, while within the food services sector, earnings have risen to $20.78 per hour.

Other broader industry issues also tie into the challenges of employment and worker wage issues:

  • Tipping increased during the pandemic years for essential workers, including for many of those employed at franchises. But in the years since, consumer tipping fatigue has set in and left workers more dependent on hourly wages.
  • Employers in many industries are having difficulty recruiting and retaining employees due to rising pay expectations, with frequent and high turnover threatening to harm business continuity for some small businesses.
  • The yet-to-be-settled legal question of joint employment status, as it applies to franchisee owners and their parent franchisor organization, could also impact bottom lines at some point, possibly as early as later this year.

Employment and Worker Wage Risk Management

Employment and worker wage challenges can pose a number of second-order risks for franchisees. If your business is understaffed or has high turnover, you may face difficulties filling or refilling positions, lower workplace morale and even a higher rate of claims.

Employment claims by workers against their employer are already common in the franchise industry, including claims for discrimination, harassment and wage and hour law violations. But rates for these claims tend to rise with higher turnover. There’s also speculation that labor law claims could rise under potential new joint employer rules, due to shared liability and the deeper pockets of parent organizations. Improving and standardizing your hiring and employment practices can help manage these risks.

Besides employees making claims against a business, other workplace issues can arise under such staffing pressures. For one, there’s the potential for increased theft from the franchise, particularly by under-vetted employees. This type of theft can have a significant impact on inventory and sales. While security technology can help, making changes to your hiring practices may ultimately be more cost effective.

Another worrying impact of staffing pressures is the potential for increased accidents and injuries, leading to third-party lawsuits and workers’ compensation claims. Employees could make more mistakes that injure customers or get hurt themselves, due to unfamiliarity with procedures, lack of training or critical roles being unfilled or understaffed. If your franchise does have high turnover or unfilled roles, making the most of training and creating a culture of safety can do a lot of good and help minimize claims.

Insurance for Your Franchise

Protecting your business from a shifting array of franchise owner challenges is never easy, but you don’t have to do it alone.

The Restaurant Supply Chain Solutions Insurance Program offers tailored coverage specifically made to protect Restaurant Supply Chain Solutions franchises, including Property, General Liability, Employment Practices Liability, Workers’ Compensation and more. Learn how you can protect your business today.