How Franchises Can Come Out On Top When Consumers Cut Back On Spending

In today’s economic climate, there is no such thing as a typical American consumer. Spending habits across the country are far from consistent, and it’s up to the franchise industry to keep up in order to survive.

One segment of the franchise industry that’s especially sensitive to consumer spending habits is restaurants. After the restaurant industry’s volatile first quarter, Joel Naroff, president of Naroff Economic Advisors and an economist for TDn2K, told QSR Magazine, “Over the past four months, consumer behavior has been varying wildly and it is not clear why. The willingness to spend on most goods, especially eating out, seems to wane and then come back.”

That willingness to spend money on eating out typically comes back in the summer months when the weather is nicer and more customers are out and about. But the National Restaurant Association predicts that restaurant owners will face financial challenges in 2016 because the economy is experiencing only moderate growth. That means that as franchises dive further into this season, they need to be prepared to face a consumer base that’s continuing to cut back.

There are a few ways restaurant franchises are able to overcome reductions in consumer spending—one is by getting creative when it comes to cutting their own costs. Brands can save money by altering the way they present their products to consumers—cheaper packaging and even different physical menus are ways to save money without changing actual food products. Franchises can also reevaluate the vendors and delivery schedules they’re using to see if there’s a more financially savvy way to operate their businesses.

Another way restaurant chains are able to save money when consumers spend less is by analyzing their menu options. Food Service Warehouse recommends looking at the gross profit on every item to see if it’s taking away from the overall bottom line. Signature dishes and customer favorites obviously need to stay on brands’ menus, but if other items are using up more money than they earn, they can be dropped or changed.

Beyond making internal changes to business models and menus, franchises need to separate themselves in their unique markets to keep the customers that are spending money on dining out coming back. That means selling their strong points. Brands that specialize in current industry trends like health and wellness, such as Freshii, still appeal to consumers who are concerned with clean eating and being environmentally friendly even when they’re watching their wallets. Other franchises like The Roman Candle stand out to customers who value brands that use fresh, local ingredients.

“The fact that we use local ingredients, local suppliers and local franchisees really plays well for our brand. Wisconsin is our home, and we want every pizza we make to reflect that,” said Brewer Stouffer, The Roman Candle’s founder and CEO. “Our story is a Wisconsin story, and it translates really well to our customers in markets across the state.”

Standing out in a specific segment isn’t limited to restaurants—it’s a tactic that all franchises can employ to better position themselves in a less than stellar economic climate. Until consumer spending habits in the U.S. inevitably bounce back, it’s best for franchises across the entire industry to be prepared.