Navigating the 2025 Landscape: Projections and insights from multi-unit franchisee leaders

With the 2024 presidential election in the books, 2025 has arrived with a fresh set of challenges and opportunities for multi-unit franchise operators across the country. The new year's economic landscape offers challenges, including high interest rates and ongoing inflation. Still, franchising remains a solid investment and proven business model. By leveraging established strategies and adapting to changing market conditions, savvy multi-unit franchisees are poised to thrive.

To gain insights into the challenges and opportunities facing multi-unit franchisees, we posed three questions to members of the Multi-Unit Franchising Conference (MUFC) board of directors. These seasoned veterans have weathered economic storms before and know how to continue to drive growth and success.

A common theme among these experts is the need to address economic uncertainty and labor market tightness while taking advantage of opportunities that may come along. They also emphasize the importance of focusing on operational excellence, managing cash flow, controlling costs, and prioritizing the customer experience.

Read on for their perspectives and strategies for navigating the year ahead.

Jesse Keyser is CEO of Keyser Enterprises. He operates multiple Sport Clips, Oxi Fresh Carpet Cleaning, and Ideal Image locations.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? I don't think much changes in 2025. The only thing that is going to be interesting is that 20% of the leases on a five-year lease are coming up for renewal. With more than four years past the pandemic, people will be closing down nonperforming locations faster than ever before.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? There will be opportunities to buy or just pick up abandoned locations.

What are some ways multi-unit franchisees can prepare their businesses for 2025? Have your financials in order, and don't take on expensive debt unless it's necessary for more cash flow.

Aziz Hashim is managing partner of NRD Capital. The company's franchise portfolio includes well-known brands Ruby Tuesday and Frisch's Big Boy as well as fast-growing brands Fuzzy's Taco Shop and The Captain's Boil.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? The devasting impact of inflation has had its effects on the economy and the political climate--affordability of everyday goods and services has reached historic lows for the average American. There are no signs that this trend will reverse because operating costs at the retail level don't often decline. Retail prices, while not increasing, are unlikely to go down. Unit-level economics (ULE), therefore, remain key as always. Brands that offer superior ULE will attract franchise development, and those that don't will have to revise their business model to ensure that franchisees can get an acceptable ROI.

At NRD, we continue to focus on driving ULE across all our brands to respond to financially strained consumers by ensuring that our brands can sell their products to customers at competitive prices while still making a good return on invested capital for our franchisees. Discounting to drive traffic while ignoring unit profitability is a risky and unsustainable strategy in our view.

Credit costs, while declining, are still high for retail brands as financial institutions still consider the retail sector to be high risk due to a spate of closures. This will tamp down new development for the immediate future.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Nonperforming units will be a drag on multi-unit franchisees' portfolios and drain valuable resources away from the performing units. Underperforming units tend to take disproportionate time and energy to manage and are bad for team morale. Development agreements are unlikely to be met on schedule due to a lack of financing while the retail economy remains weak.

Labor remains challenging, which is more due to cost than availability. Some areas are already at $20/hour at a time when consumers want more discounts on products. Automation and AI will eventually kick in slowly but are unlikely to materially impact 2025 conditions.

What are some ways multi-unit franchisees can prepare their businesses for 2025? Units within a franchisee's portfolio must be examined carefully. We have always recommended an ongoing "pruning of the tree." While no operator likes to close units, the reality is that underperforming units must be eliminated for the overall health of the "tree." Negative cash flow units represent a drag on a franchisee's finances, take precious time and resources from stronger units, and can potentially even create consumer risks, particularly in the restaurant and other perishable goods spaces.

New unit opening commitments should be carefully reviewed from a ULE point of view and an exit point of view. What if a new unit does not perform? Are there clear exit strategies to mitigate the loss? Franchise brands that do not have a clear and reasonable exit pathway for poorly performing units should be considered very carefully before committing to development agreements.

Labor conditions must be monitored vigilantly. In areas where labor is increasingly challenged, development should be redirected to areas where labor is more plentiful.

John Hotchkiss operates multiple Little Caesars Pizza and Firehouse Subs locations, and he is involved in real estate development in Texas and Louisiana.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? I don't see any major economic changes for 2025. Inflation and interest rates will probably stay close to today's rates. I think our sales will continue to increase as they have over the past five years. Franchises in 2025 will probably have similar results as in 2024. President Trump's economic policies will probably not affect much until 2026, when I think things will begin to change, resulting in winners and losers depending on their specific business model and location.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? I think Trump's eventual deregulations will have a big positive effect on the franchise community as it relates to financial, tax, and labor regulations. However, I do not see how more tariffs will help anyone, including business owners, but could really damage everyone's financial situation as it relates to much higher prices for everyone. If Trump gets his way and deports 10 to 20 million immigrants from our country, then we will lose that many customers in our economy--specifically in Texas, where we operate. Mass deportation will also add to the ongoing labor shortages and inflation issues and will affect food and labor costs.

What are some ways multi-unit franchisees can prepare their businesses for 2025? I think the middle and lower classes of our society will continue to suffer financially unfortunately. Franchisees with businesses that sell goods and services to the upper classes will do great since they'll have more money to spend. Inflation and low or stagnant wages for the poor and middle class will probably continue. Multi-unit franchisees should consider diversifying their investments to take advantage of opportunities that align with Trump's new economic plans.

Toya Evans operates Healthy Living Ventures. Her portfolio includes Tropical Smoothie Cafe, Hand & Stone Massage and Facial Spa, and Vio Med Spa.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? With a new administration that is business friendly, I expect that we will see a reduction in interest rates, and banks will be more receptive to lending for expansion. I also expect that joint-employer discussions will taper. This and other potential incentives support our business expansion goals.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Expansion opportunities and access to capital for projects.

What are some ways multi-unit franchisees can prepare their businesses for 2025? Have a road map and execute. Evaluate what systems and processes you may need to support business goals, have a plan, build the relationships necessary, and get it done.

Robert Branca Jr. is president, general counsel, and director of development for entities, including Branded Management Group and Branded Realty Group, doing business in Massachusetts, Ohio, and New York. He and his direct family partners own and operate more than 200 Dunkin'.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? The massive spending bills passed during President Biden's administration (CHIPS and Science Act and Inflation Reduction Act) have deployed both public and private capital, and that is just now about to take root. Absent any "black swan" or other unforeseeable events, this should stimulate domestic economic activity and create opportunity for those positioned to capitalize on it. Other economic forces already entrenched that have boosted the fortunes of those with investable assets in this bifurcated economy will continue to deliver returns and more investable capital to exploit the new opportunities. I see an economic flywheel coming that could greatly expand our economy further, providing that excesses in past expansions are not repeated.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Multi-unit franchisees have always seen and pursued expansion opportunities made available by stimulus spending, such as these pieces of legislation, whether to build new units, invest in efficiency-enhancing or traffic-boosting remodels and relocations, or add new brands. I see this potentially expansionary economic period to be no different. Established brands with strong franchisee bases are best positioned to move to seize the most desirable opportunities due to experience, established support and capital networks, extensive due diligence, and market knowledge that comes second nature to them.

What are some ways multi-unit franchisees can prepare their businesses for 2025? The bifurcated economy that I referenced above is no secret; higher-income consumers who own homes with historically low mortgage rates and any other assets have been more than fine and are expected to continue to be so in the coming administration. Lower-income consumers have had a very different experience, and many franchisees should position themselves to capture the business of this economic cohort as they, hopefully, achieve more disposable income and economic freedom. Franchising already supports this exact opportunity through franchise ownership itself and the upward mobility of people who work for franchise owners, so it is only natural for our industry to advocate for and foster policies that promote economic freedom and upward mobility. Importantly, it is vital for often-neglected communities to share in the rewards. It is not only the long overdue right thing to do, but it is an existing, largely untapped economic growth engine that will provide much and expand that flywheel effect in many ways.

Multi-unit operators should pay very close attention to the upcoming nearly certain tax legislation. There are several aspects of it that directly and substantially affect a typical multi-unit franchise owner. Of particular note has been the loss of accelerated depreciation because the TCA was passed through reconciliation. The reconciliation process requires legal provisions to pay for any tax deductions. We happened to be the "pay for" during that last round in 2017. Any franchise owner with a brick-and-mortar store has a remodel obligation, and the cost of remodels has skyrocketed in recent years. This is a major impact on a franchised business' cash flow.

The Section 199A 20% tax deduction for pass-through entities was also crucial in helping our industry. To some extent, this offset the loss of the SALT deduction for franchise owners. It also was critical in assisting locally owned franchise businesses and competing directly against large multinational corporate-owned stores of publicly traded companies. For example, my fellow franchisees and I compete directly with Dunkin' against Starbucks, which enjoys a permanently reduced 21% tax rate.

There are other key considerations, and I urge all franchise owners to attend the International Franchise Association's event in Washington, D.C., in September to advocate for their own interests. No one can do it better than you yourself can.

Lauren Johnson is the president of Quadcoast. She oversees four The UPS Store units in the Cleveland area.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? Notable drops in business investment and housing activity in 2023 set the foundation for improved performance in 2024. I expect that interest rates will reduce in early 2025, making it easier to invest in potential new ventures. I am also optimistic that consumer spending will rise, positively affecting store numbers. On the basis of inflation forecasts and from what we've seen this year, inflation is slowing. For my own business, I'm working toward lowering my labor costs, which has proven difficult with the increase in the total amount my business spends on employee wages and benefits. High minimum wages, increased demand for labor, rising healthcare costs, and general inflation lead to higher salaries needed to attract and retain employees.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? I am hopeful that with the improvement of the economy, there will be greater consumer spending, lower inflation, and, ultimately, a better opportunity for business expansion for multi-unit franchisees.

What are some ways multi-unit franchisees can prepare their businesses for 2025? One way to prepare our businesses is to keep up with appropriate pricing adjustments for our target market. We can also focus on strategies, like strengthening your financial position by managing cash flow, reducing unnecessary costs, building a cash reserve, investing in marketing and innovation, analyzing market trends to identify new opportunities, improving customer service, and adapting the business model to meet evolving consumer needs. Essentially, position your company to quickly capitalize on increased demand when the economy picks up.

Brooke Wilson owns and operates seven Two Men and a Truck markets in Georgia and North Carolina.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? As we enter 2025, political shifts--both domestically and globally--will play a significant role in shaping economic trends. Policy changes in taxation, labor regulations, tariffs, and small business incentives will directly impact the franchise community. While these changes could create uncertainty, they may also open opportunities for growth if the right strategies are in place.

The franchise marketplace is seeing rapid evolution, especially with the growing influence of private equity at both franchisor and franchisee levels. Service-based models, in particular, are being transformed by private equity investments. While this brings increased resources, scalability, and operational efficiencies, it can also introduce challenges, such as prioritizing short-term financial gains over long-term brand equity and franchisee autonomy.

For my business, 2025 is about continuing to create value by focusing on brand awareness, enhancing customer experience, and leveraging technology for operational excellence. Succession planning remains a key priority, ensuring that our operations are poised for sustainable growth in a competitive marketplace.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Multi-unit franchisees will face both opportunities and challenges as private equity continues to reshape the franchise landscape. Consolidation is likely to increase, potentially limiting market entry for small operators while creating opportunities for large operators to expand their portfolios.

Economic pressures, such as inflation, labor shortages, and interest rate fluctuations, will continue to strain margins, requiring franchisees to innovate and optimize their operations. Political changes in 2025 may bring new labor policies, minimum wage adjustments, or healthcare regulations, all of which will demand careful financial planning and adaptability.

Additionally, private equity-driven franchisors may impose strict operational standards or additional fees, impacting franchisees' profitability. However, franchisees with strong management practices and economies of scale will be well-positioned to capitalize on these shifts.

What are some ways multi-unit franchisees can prepare their businesses for 2025?

• Strengthen financial planning. Anticipate potential economic shifts and allocate resources strategically. Evaluate costs, identify areas for efficiency, and maintain liquidity to weather any uncertainty.
• Focus on succession planning. Whether transitioning ownership or expanding operations, ensure leadership pipelines are in place. Prepare for long-term stability by identifying and training successors or key management staff.
• Leverage technology. Invest in systems to improve operational efficiency, enhance customer experience, and provide data-driven insights to make informed decisions.
• Adapt to workforce changes. Stay ahead of potential labor policy adjustments by investing in employee training, offering competitive benefits, and fostering a strong workplace culture.
• Maintain brand integrity. Work closely with franchisors to ensure alignment with the brand's long-term goals. Protect the customer experience and community relationships.

By remaining proactive, adaptable, and focused on creating value, multi-unit franchisees can thrive in a rapidly evolving economic and franchise landscape.

Jerome Johnson is a multi-unit franchisee with Sonic Drive-In, Dunkin', Baskin-Robbins, and Jersey Mike's Subs.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? My vision is that the economy will continue to move toward digital/third-party sales and AI technology. The franchise marketplace will continue to grow and shift with the economy, integrating technology to streamline operations.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Digital and AI technologies will impact the franchise business by improving operational efficiency and customer experience. Overall, these technologies will help franchises scale, reduce costs, and stay competitive in a rapidly evolving market.

What are some ways multi-unit franchisees can prepare their businesses for 2025? The biggest thing for franchisees in 2025 is to embrace technology by investing in digital, third-party sales, and tools like AI.

Rocco Fiorentino is president and CEO of Benetrends Financial and a director and board member for Swiss Farm Stores and Saxbys Coffee.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? My vision for the economy in 2025 is extremely positive. Most experts expect a 2.5% growth in 2025 for the U.S. gross domestic product, and that is certainly a bullish outlook. The U.S. economy is in a good place. I believe recession fears have diminished. Inflation is trending back toward 2%, and the labor market has rebalanced but remains strong. All indications are that the S&P 500 is expected to have a 10% return for 2025.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? I believe the latest consumer confidence index is certainly much more positive than we have seen it in quite a while, and Americans are feeling better about the economy. What this means is that Americans will continue to open their wallets, purchase big-ticket items, such as automobiles and homes, and continue to reinvest in their businesses. Energy will also play a big role in consumer spending habits over the next year, and I anticipate energy costs will drop in the first quarter of the year, providing more discretionary income to consumers. I believe anyone sitting on the sidelines during the recent election year should be off to the races, get back in the market, and get ready for a solid year ahead.

What are some ways multi-unit franchisees can prepare their businesses for 2025? First, prepare yourself. Lead your business with confidence, intention, and clarity in 2025.

Second, prepare your leadership team. Develop your leadership team to lead alongside you. Your business is only as strong as the leaders beside you. After all, no matter how hard you try, you can't do it all yourself. Investing in developing your leadership team means investing in the sustainability and skill ability of your business.

Third, prepare your strategy. Get your organization aligned to a shared vision for the future. Please make sure your shared vision is not just your old vision. A lot has changed. Revisit your strategy, your vision, your mission, and your purpose. Get input from your team. Don't do this alone!

Grant Simon is co-founder and CEO of LSGF Management where he oversees multiple T-Mobile, Great Clips, and Smoothie King locations.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? With an incoming business-friendly administration having clinched full control of Congress and federal interest rate cuts expected to continue, the prospect of a growth economy is excellent. By late 2025, multiple factors will drive growth, including regulatory reforms, lower taxes, and increased availability of attractively priced debt capital. In addition, 2025 should also be the year that businesses realize significant productivity gains through more widespread AI applications, spurring both the economy and profitability.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Because regulatory compliance correlates to the number of employees or revenues, some multi-unit franchisees have had to reconsider growth strategies. The new administration's intent to relax federal requirements could alleviate growth pressures and create a more robust business environment. With interest rate cuts projected in 2025, the lower cost of both capital and existing debt will be another growth catalyst for franchisees.

What are some ways multi-unit franchisees can prepare their businesses for 2025? High wages will continue to increase and create headwinds for franchisees in 2025. Strategic payroll management, including scheduling optimization, staff retention, and productivity tools, may generate cost efficiencies and increase profitability. As construction costs and rents will most likely remain high, accurate and adequate budgeting is vital for growth.

Karim Khoja is the founder of Bravo Hospitality Group, which operates Comfort Suites and Four Points by Sheraton.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? My vision for the economy in 2025 is neutral. There are too many factors that we can't control now. The potential tariffs and the conflicts in the Middle East, Ukraine, and other parts of the world will have major impacts on our economy. I am hopeful that most of it will be positive for the U.S. We are a country in a great position to benefit from all the economic turmoil in most parts of the world. The new digital transformation that is happening right now with blockchain and AI will benefit the U.S. economy in positive ways.

My personal business in the hotel industry will for sure be using a lot of AI and robotics in the coming years to benefit profitability and the guest experience.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Multi-unit franchisees will likely adopt AI-powered tools for inventory management, workforce scheduling, and customer relationship management. This will reduce overhead costs and streamline operations, especially for franchisees managing multiple locations. Rising labor costs will push franchisees to automate routine jobs with self-service kiosks in food and robots in warehouses.

What are some ways multi-unit franchisees can prepare their businesses for 2025? I think leveraging technology and all the new tools coming out in the next year will have a positive impact on multi-unit franchisees. Franchisees need to embrace the digital transformation that is happening right now. They must be focused on all aspects of customer engagement. Regulations will be easier to manage with all the new tools available for cybersecurity, AI, etc. Three key aspects that franchisees can focus on are standardizing processes, using automation to their advantage, and using centralized management tools that are readily available today.

Mitch Cohen is a multi-unit franchisee with Jersey Mike Subs and Sola Salons.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? I am hopeful in 2025 for our business that the interest rates will continue to drop. We expect to develop both our brands. The franchise industry is stronger than ever and will continue to grow. I have seen so many emerging brands that are seeing growth. It is encouraging, and my brands have been growing at record numbers. My only concern with 2025 is what the new administration will do with the import taxes.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Depending on how the taxes are imposed, it could affect supply chain and building cost. That will slow development down and impact the prices we charge our guests.

What are some ways multi-unit franchisees can prepare their businesses for 2025? I am sure you have heard this before, but cash is king. I would be budgeting extra for an increase in cost and labor. I would be looking at beyond 2025 and what we can do as an industry to continue to grow in cost-effective ways and expand our labor force.

Paul M. Booth Jr. is president of Concentric Brands. He owns and operates Ace Hardware locations.

What is your vision for the economy, the franchise marketplace, and your own business in 2025? The economic outlook for 2025 will continue to present dynamic challenges and opportunities. We saw some growth in the economy in 2024 mainly driven by consumer consumption. As we look toward next year, inflation will continue to cool and borrowing costs for expansion, though high, will not impede business growth. There will be some economic policies by the incoming administration that will affect trade, such as tariffs, which will raise consumer prices. The potential immigration policies could affect the labor market and cause wages to continue to increase.

Despite these potential variables, there will be continued growth in the economy. For my business, my vision is to continue to carefully vet industries and brands that are seeing positive growth, strong operational efficiency, and high consumer demand.

In what ways do you think this will impact multi-unit franchisees and their business operations in the coming year? Multi-unit franchisees will have to pay close attention to legislative changes that can affect their businesses, impact consumer demand, and affect talent management. Franchisees will have to be strategic about growth opportunities going forward.

What are some ways multi-unit franchisees can prepare their businesses for 2025? Multi-unit franchisees should meet with all their professional service providers, such as accountants, financial advisors, etc., to create a plan for the year and discuss their potential goals and opportunities. Franchisees also need to be aware of the direction their brand is going so that they can stay ahead of the curve.