How are you adjusting your investment and expansion strategy in light of current economic conditions (interest rates, inflation, consumer spending)?

Like many other business owners, restaurant franchisees are currently facing several challenging economic circumstances. These factors impact the decisions they make about their business on a daily basis, as well as how they plan and expand in the future.

Franchise Update asked members of the Multi-Unit Franchisee Advisory Board how they may be adjusting their investment and expansion plans given these economic conditions. These four franchisees provide valuable insights with more than 200 current locations and nearly 100 combined years in franchising.

Construction costs, the impact of tariffs, and increases for insurance, rent, and interest rates are some of the main concerns cited by the board members. Not surprisingly, these franchisees remain undeterred in their outlook and plans to grow their business. They say it will require some adjustments on their end by making smarter investments, broadening their portfolio by expanding into different segments, or adjusting prices. Acquisitions, rather than build-outs, are another example of a new approach to offset increased construction costs.

As we approach the holiday season, many people are taking time off to rest and enjoy time with family and friends. Some may even use that time to travel to a relaxing destination and recharge their batteries. In Multi-Unit Franchisee magazine, we asked restaurant operators where they went on their last vacation. As you’ll read in the Franchisee Bytes section below, these franchisees traveled the country and the globe to enjoy some fascinating sights and experiences.

John Hotchkiss

Company: DHC of San Antonio

Brands: 45 Little Caesars, 4 Dave's Hot Chicken, 2 Firehouse Subs

Years in Franchising: 25

Although we have significant concerns regarding the current economic landscape, including high interest rates, inflation, and unpredictable tariffs, we are not planning to adjust our aggressive growth trajectory. Our strategy centers on mitigating risk through financial discipline. Specifically, we expect to continue committing larger down payments and accelerating principal payments on our financing to reduce our long-term cost of capital and maintain a strong balance sheet throughout this high-rate environment.

David Ostrowe

Company: 180 Business Solutions and O&M Restaurant Group

Brands: 28 Taco Bell

Years in Franchising: 30

I’m bullish on 2026. We’ll still see pressure from commodities, insurance, and construction costs, but labor is expected to remain relatively flat, which opens the door to smart growth. We’re continuing to add new sites to our portfolio, while also expanding into other segments and concepts where we can leverage our existing scale.

Robert Branca

Company: Brand Management Group

Brands: 39 Dunkin’, 7 Interstate Battery

Years in Franchising: 22

We have always had our suppliers sharpen their pencils at renewals, and that will continue, especially insurance and lenders. We are more circumspect with taking on debt and have diversified into multi-family rental housing to broaden our investment portfolio.

Greg Thomas

Company: LSGF Management

Brands: 71 Great Clips, 4 Smoothie King, 1 Salty Dawg

Years in Franchising: 21

Construction costs have skyrocketed in recent years. Rents have gone up, too. All told, the cost to open a new location has increased by about 30 percent. The higher cost basis means a lower ROI, so I think the smarter investment for 2026 is to acquire existing stores rather than build new ones. My business partner, Grant Simon, and I built six new Great Clips in the last couple of years. In 2026, we plan to curtail our new-builds to about one a year, and the rest of our growth will be through acquisitions. 

On the consumer side, we’re seeing brands increase their discounts (coupons) to try to boost traffic. At the same time, franchisors are encouraging stores to keep their prices down by telling them this is not the right time to raise prices. Franchisors make their money off top-line sales while franchisees make their money off bottom-line profits. While I respect their opinion, higher construction costs combined with higher discounts mean lower profits, and I’m not willing to do that. Why? Because lower profitability hurts not only our cash flow, but also the resale value of our stores, which sell for a multiple of earnings. Fortunately, as a franchisee, I have the right to set my own prices. For 2026, we plan to adjust prices so that we can maintain store-level profitability of 20 percent of sales.

Franchisee Bytes

Where was your last vacation?

I took a trip back to South Africa to visit family in March. It was great to reconnect with my roots.
-Lawrence Kouri, Multi-Unit Owner-Operator, Dave’s Hot Chicken, 22 Dave’s Hot Chicken

Fort Lauderdale, Florida, in April.
-Tom Lovelace, Owner/President, Tom Lovelace Group, 96 Papa Murphy’s

My wife and I took our sons to the British Virgin Islands in July.
-David Weeks, CEO, The Bean Team, 9 Barberitos, 8 Dunkin’, 4 Newk’s Eatery, 1 Dunkin’/Newk’s co-brand

Martha's Vineyard in August 2024 for the African-American Film Festival.
-Jerome Johnson, Multi-Unit Franchisee, John Cove Management and Jbar Inc., 4 Sonic Drive-In, 10 Dunkin', 4 Baskin-Robbins, 1 Jersey Mike's Subs

Grand Cayman in May.
-Mike Kulp, CEO, KBP Brands, 828 KFC, 119 Arby’s, 85 Sonic, 56 Taco Bell

We climbed Mt. Kilimanjaro in Tanzania and reached the highest mountain peak on the African continent together.
-Phong Huynh, Co-Owner, Fuego Investment Inc., 30 El Pollo Loco

Doha, Qatar, and Abu Dhabi, United Arab Emirates, in October 2024.
-Carrie Ayers, Owner/Operator, 6 Playa Bowls

I spent four weeks in India in February. I traveled to the Maha Kumbh, a spiritual festival that is widely considered the largest gathering of humanity.
-Sam Chand, CEO, Jasam Enterprises, 25 Checkers & Rally’s, 35 KFC

Paris with my wife for our 10th anniversary in September 2024.
-Nick Crouch, Co-CEO, Dyne Hospitality Group, 118 Tropical Smoothie Cafe

Xcaret in Mexico in March 2024.
-Chad Given, Brand President, Sizzling Platter, 361 Little Caesars, 107 Little Caesars Mexico, 185 Wingstop, 92 Jamba, 33 Jersey Mike’s Subs, 31 Dunkin’, 7 Sizzler, 5 Red Robin, 1 Cinnabon