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What are some creative ways to reduce your franchise's overhead costs?

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As a franchise owner, you know how important it is to manage your expenses and maximize your profits. But sometimes, you may feel like you have little control over your overhead costs, such as rent, utilities, payroll, and royalties. How can you reduce these costs without compromising the quality of your products or services, or the satisfaction of your customers and employees? Here are some creative ways to lower your overhead costs and boost your bottom line.

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1 Negotiate with your landlord

One of the biggest overhead costs for many franchises is rent. If you have a long-term lease, you may be able to negotiate a lower rate or a rent relief with your landlord, especially if the market conditions have changed or your business has been affected by the pandemic. You can also ask for other concessions, such as free parking, maintenance, or signage. Be prepared to show your financial statements, your business plan, and your value as a tenant.

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2 Optimize your energy use

Another significant overhead cost is energy. You can save money by switching to more energy-efficient appliances, lighting, and heating and cooling systems. You can also install smart thermostats, sensors, and timers to adjust the temperature and lighting according to your business hours and occupancy. You can also encourage your staff and customers to conserve energy by turning off unused devices, unplugging chargers, and using natural light when possible.

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3 Outsource non-core tasks

You may be able to reduce your payroll and benefits costs by outsourcing some of the non-core tasks that are not essential to your franchise's operations or brand identity. For example, you can hire freelancers, contractors, or virtual assistants to handle tasks such as bookkeeping, marketing, customer service, or IT support. You can also use online platforms, software, or apps to automate or streamline some of the administrative or repetitive tasks, such as scheduling, invoicing, or inventory management.

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Tonya Mangels

Marketing | Strategy & Sales Growth | Brand & Digital | E-Commerce | Account Management | Business Leadership. Results driven strategic leader, innovator, growth & transformation expert.
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Definitely an opportunity to outsource select positions. Hiring consultants or fractional talent over full-time staff offers benefits in many cases, emphasizing long-term value over upfront costs. Expert consultants bring immediate expertise and knowledge, helping you sidestep pitfalls and establish strategic connections. Their efficiency means less time is required, offsetting concerns about hourly or retainer rates. Ultimately, it's an investment in the unparalleled value they provide, making the focus on quality and outcomes.

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4 Renegotiate with your suppliers

You may be able to lower your cost of goods sold by renegotiating with your suppliers for better prices, discounts, or terms. You can leverage your relationship, your volume, or your loyalty to ask for more favorable deals. You can also compare prices and quality among different suppliers and look for alternatives or substitutes. You can also join a buying group or a cooperative to take advantage of bulk purchasing and economies of scale.

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5 Implement lean practices

You can also reduce your overhead costs by eliminating waste and inefficiency in your processes and systems. You can adopt lean practices, such as the 5S method (sort, set in order, shine, standardize, and sustain), to organize your workspace, equipment, and inventory. You can also use tools such as value stream mapping, kaizen, or kanban to identify and eliminate the sources of waste, such as defects, overproduction, waiting, transportation, inventory, motion, or over-processing.

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David Lemon

Director of Sales & Business Development
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As a multi-shop franchise manager, I embraced lean methodologies to trim excess expenses across locations. Using the 5S system, I sorted tools and spare parts, standardized inventory levels, and instilled rigorous cleanliness habits for efficiency. With detailed process mapping, I pinpointed lagging shops struggling with workflow inefficiencies. Implementing kaizen rapid improvements and kanban pull systems, I improved maintenance scheduling to cut down costly technician downtime. Regularly analyzing our value stream, I asked where steps could flow faster without sacrificing quality. By continually identifying and cutting waste – overstocked materials, disorganization, waiting cars and technicians – I realized substantial overhead savings.

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6 Seek feedback and suggestions

One of the best ways to find creative ways to reduce your overhead costs is to ask for feedback and suggestions from your customers and employees. They may have valuable insights, ideas, or solutions that you may not have thought of. You can use surveys, polls, focus groups, suggestion boxes, or online forums to collect and analyze their opinions and preferences. You can also reward them for their contributions, such as offering discounts, coupons, gift cards, or recognition.

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David Lemon

Director of Sales & Business Development
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I regularly survey my auto shop franchise staff and customers to spark new overhead-cutting innovations - their input from the frontlines offers invaluable insights I otherwise miss in the office. Online polls and comment cards invite brutally honest suggestions: where do they see inefficiency or waste in our operations? I also hold periodic brainstorming lunches, rewarding attendees with gift cards and implementing viable ideas like buying bulk oil filters. Each contribution moves the needle bit by bit. And the employee perk improves retention while the customer perk drives loyalty. By continually crowdsourcing waste-spotting perspectives from my team and community, I embed overhead optimizations into the franchise culture itself.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Matt Robinson

Epic Managers for Franchises | Fortune 100 Operator | Investor | Franchise owner | Management 2.0 ??
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A franchisee’s highest overhead cost is usually labor. And the top driver of labor waste is turnover, but it’s invisible on the P&L. Most turnover is directly attributable to the manager - putting a strong, process-oriented manager in place creates a virtuous cycle of consistency and motivation that drives turnover down and performance up.

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What are some creative ways to reduce your franchise's overhead costs?

1

2

3

4

5

6

7

1 Negotiate with your landlord

2 Optimize your energy use

3 Outsource non-core tasks

4 Renegotiate with your suppliers

5 Implement lean practices

6 Seek feedback and suggestions

7 Here’s what else to consider

Franchising

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What are some creative ways to reduce your franchise's overhead costs?

1

2

3

4

5

6

7

1 Negotiate with your landlord

2 Optimize your energy use

3 Outsource non-core tasks

4 Renegotiate with your suppliers

5 Implement lean practices

6 Seek feedback and suggestions

7 Here’s what else to consider

Franchising

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