Franchise Fees Are Likely to Rise in 2022, if the September 2021 CPI is Any Indicator
October 27, 2021 —The Consumer Price Index rose almost 5.4% in September 2021, compared to September 2020, propelled by categories like used cars and trucks soaring 24.4% and energy climbing 24.8% on average in U.S. urban areas. High prices for homes inspired a four-decade low in consumer perceptions of “good time to buy a home” — but see their relatively upbeat sentiments about buying a business.
And the expenses that fuel franchise growth — leadership talent, labor, raw materials, equipment — show escalating prices, be they “transitory” or longer term. For franchise sales, lead generation costs have increased with the impact of Apple privacy changes on retargeting in general, and on Facebook effectiveness tracking, and the resultant incremental shift to Google has anecdotally increased competition and prices there.
So how will franchises respond? How will initial franchise fees adjust in this environment? To help answer this question, and provide benchmarking data by franchise category, we invited active franchise owners to participate in a confidential survey, the results of which will be shared in the coming days.
Of course, the answer may depend on the growth stage of the franchise, competitive factors, and specific exposure to the escalating cost drivers, and the most important factor of all — price elasticity of demand. Just how sensitive are franchise prospects to initial franchise fees? Stay tuned.
If you are a franchisor, participate in our one-minute franchise fee benchmarking survey and get a copy of the results.
FranchiseVentures is the leading demand– and lead-generation platform for potential franchisees to thousands of growing franchise systems in the United States and Canada. Its franchise lead generation brands include Franchise.com, Franchise Solutions, Franchise Gator, Franchise Opportunities, Franchise For Sale, SmallBusinessStartup.com and BusinessBroker.net, and together they provide the largest aggregation of prospective franchise buyers in the U.S.
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Published on Wednesday, October 27th, 2021.