Squeezed at the counter: Navigating a volatile 2026

Quick-service restaurant (QSR) franchisees are running a tighter, riskier business than they were just a few years ago. Rising input costs, a shifting labor market, tariff-driven supply chain disruption, and increasingly selective customers have combined into what the CEO of one of the country’s largest franchise development companies called a set of challenges that certain franchise operators address while others "struggle and just wallow in." For the roughly 275,000 QSR franchise locations across the country, 2026 is a year defined less by growth than by discipline.

There are several issues that are top of mind for franchise operators of QSRs, with labor landing squarely on top. While labor, globally and post-pandemic, has been an issue for many industries, for franchise operators of QSRs, the circumstances can be somewhat unique. For QSRs, generally, the work can be physically demanding and fast-paced in nature and, combined with competition from other entry-level sectors, it continues to push wages upward and turnover, as a result, can be expensive to manage. Unlike ingredient costs, which fluctuate, labor is a steadily rising baseline expense that franchise operators of QSR’s have to plan around every year.

Trade policy has added a second layer of unpredictability that was not necessarily a concern just a couple of years prior. Recent polling of franchise operators of QSRs shows that tariffs have not only pushed up the menu prices they charge customers, but also contribute to supply chain volatility, in each case, either individually or collectively, creating a major obstacle to running a consistent operation. Beef, paper goods, packaging, and kitchen equipment are especially exposed to tariff swings, forcing franchise operators of QSRs to substitute ingredients or adjust menus on short notice; changes that may confuse regular customers and potentially erode brand loyalty built over years. Notwithstanding the recent tariff relief with respect to beef, specifically, there has been no indication that this uncertainty will not continue to persist throughout the rest of 2026.

Perhaps the most unpleasant trend for franchise operators is happening on the other side of the counter. A successful, prosperous and thriving QSR franchise operation begins with a customer base that receives great service and a consistent, affordable product, which can result in a loyal following.  However, with the increases and product pricing meant to offset rising costs, many franchise operators of QSRs are approaching, or have approached, a threshold in which customers no longer consider the product “affordable.” If that threshold is crossed, the customer is presented with a choice – continue to patronize the QSR or look for an alternative that may present a similar product that is more affordable.  Alternatively, if the affordability threshold has been eclipsed, a customer may look for a different concept (e.g., a more traditional restaurant) that they may consider to be of a higher standard, as their money will be spent in either case.  Summarily, franchise operators of QSRs can no longer count on price increases alone to protect their margins and operations.  Rather, they need to consider how such increases may impact their customers psychologically, and not simply from a pocketbook perspective.

Despite these pressures, franchise operators of QSRs can consider certain options and strategies to survive and stay profitable, including:

• Embracing technology with the inclusion of self-service kiosks, AI-driven drive-thru ordering, and kitchen automation, in each case being adopted to reduce reliance on an expensive, hard-to-retain labor pool and to improve efficiency without adding employees.
• Rather than reflexively raising prices, restructuring menus around ingredients with predictable, cost-stable items, which can assist in controlling costs, while also removing items that have become slow-moving. In conjunction with this comes sourcing multiple suppliers across regions that may be better insulated from impact of certain tariffs; for instance, beef and packaging.
• Committing more resources to onboarding and career development to keep staff longer and reduce constant rehiring and retraining costs.
• As it becomes more difficult to raise prices, investing more heavily in loyalty programs and menu innovation to keep customers engaged without relying purely on value promotions that can shrink margins.
• Investigating alternative models, which could include smaller footprints, adjusted labor models (specifically for simplicity) and more non-traditional locations that have not typically been utilized (e.g., transportation hubs, school or business campuses).

While it is possible that changes to the trade environment could positively impact franchise operators of QSRs, it is difficult to rely on that, particularly in the short term. In the immediate term, franchise operators of QSRs that are likely to fare best are the ones treating concept economics – labor, food cost, supply chain and customer retention – as something that must be top of mind and managed in real time, whether that is on a weekly to monthly basis.  The disciplined QSR franchise operators are more likely to survive a somewhat tumultuous 2026.