What challenges will franchise owners most likely face in 2025? Many industry experts say to expect continuing challenges involving inflation, 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.

Key Franchise Owner Challenges in 2025: Inflation

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 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, inventory and supply costs are up, which can quickly influence price of services offered. At the same time, less directly related franchise costs can also ultimately impact the price of service:

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

Inflation and Price Risk Management

There are a few things to keep in mind when it comes to managing the risks of business costs and your service prices. Since these cost pressures are most directly tied to your building, inventory and supplies, it makes sense to review your property coverage of these assets. Make sure you are aware of your policy limits and have the right limits in place. 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 insurance protection all the more important.

Work with a seasoned insurance expert like the helpful representatives at Lockton Affinity 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.

Key Franchise Owner Challenges in 2025: Employment and Worker Wages

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.

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.

Employment and Worker Wage Risk Management

Employment and worker wage challenges can pose several 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. Implementing good 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 an effect 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. Lockton Affinity’s WellBiz Insurance Program offers tailored coverage specifically made to protect WellBiz franchises, including Property, General Liability, Professional Liability Employment Practices Liability, Workers’ Compensation and more. Learn how you can protect your business today.