As a new quarter, reporting period, and year begin, franchise operators face a mix of new opportunities and lingering challenges. Cooling consumer spending, a tight labor market, and high costs continue to squeeze margins. Combined with winter’s natural seasonality, the instinct might be to focus solely on driving sales.
But that approach has its limits, and profitability is about more than revenue alone. For franchise operators, protecting margins means focusing on the financial levers you can control. That includes uncovering missed opportunities, unnecessary spending, and hidden charges that quietly erode your bottom line.
Here are three practical strategies to help you strengthen margins and position your business for a more profitable 2026 — so when sales accelerate, your margins are protected and ready to capture that growth.
1. Rethink Tax Planning as a Cash Flow Tool
Tax planning is one of the most overlooked strategic tools for adding cash directly to your bottom line. Recent changes introduced under the One Big Beautiful Bill (OBBBA) create additional flexibility and opportunities to free up capital for growth investments.
Key incentives to consider in 2026 include:
• Higher Section 179 Expensing Limits: Deduct up to $2.5 million on qualifying equipment and vehicle purchases. This is especially valuable for multi-unit operators investing in remodels or new locations.
• 100% Bonus Depreciation: Fully expense eligible large purchases in the year they’re placed in service. This can make upgrades and remodels more financially feasible.
• Expanded State and Local Tax (SALT) Cap: The SALT cap has temporarily increased to $40,000, offering potential benefits for many franchise owners operating in high-tax states.
• Increased Estate Tax Exemption: With the federal estate and gift tax exemption now at $15 million, operators planning for succession or a future exit have more flexibility to transfer or sell while minimizing tax exposure.
With the daily demands of staffing, operations, and customer service, tax planning is easy to push aside until year-end. But waiting could mean missing valuable opportunities to time deductions and maximize their impact. An advisor can help identify what applies to your situation and when to act.
2. Control Prime Costs Without Sacrificing Quality
Tax planning keeps more cash in the business, but prime cost management determines where it goes. Prime costs — labor and cost of goods sold (COGS) — typically account for 55% to 65% of total sales. Managing these expenses does not mean sacrificing the quality and experience customers expect. The goal is not to cut costs for the sake of cutting them, but to spend more deliberately.
Take a Data-Driven Approach to Staffing
Profitable operators tend to manage labor more precisely, not necessarily more aggressively. By using data from POS systems, sales forecasts, and demand patterns, you can align staffing levels with actual customer traffic instead of relying on habit or guesswork. Cross-training employees and building flexible schedules helps ensure every labor dollar is spent where it matters most, without compromising service.
Cut Waste, Keep More
Overstocks, spoilage, and waste can take a bigger toll on profitability than many operators realize. In fact, every dollar spent on reducing food waste can return an average of $14 in cost savings. For retail franchises, addressing overstocking and understocking can reduce inventory costs by 10 -12%.
Establishing regular inventory review processes helps you identify waste patterns and overstocking more easily. Pairing those reviews with clear portion standards, proper storage procedures, and a focus on higher-margin items can reduce spoilage and protect profitability. It may also be worth revisiting vendor contracts to negotiate better terms, such as volume discounts or fixed pricing.
Across multiple locations, these small adjustments can make a meaningful difference over time.
3. Address Hidden Fees That Erode Profitability
Fees from credit card processing, third-party delivery platforms, and chargebacks may seem like the cost of doing business, but their cumulative impact can be significant.
Identifying and addressing these costs is key to maintaining healthier margins:
Credit card processing fees are largely unavoidable in today’s increasingly cashless environment, but many operators overpay simply because pricing structures are difficult to track and understand. Reviewing statements to identify interchange fees, assessment charges, and processor markups can help you understand their true impact and uncover opportunities to negotiate better rates.
Chargebacks disrupt cash flow and, if they happen often enough, can lead to penalty fees from payment processors. Look for patterns in disputes, such as unclear refund policies, fulfillment errors, or potential fraud, and address the root causes. Regularly accounting for and reconciling chargebacks helps keep financial records accurate and makes it easier to spot trends that need attention.
Third-party delivery platforms can help you reach new customers, but their fees cut into profits quickly. Breaking down commissions, marketing fees, and delivery charges against net revenue provides a clearer picture of true order profitability. Over time, you may find opportunities to convert third-party customers to direct channels through loyalty programs, exclusive offers, or other incentives that reduce ongoing exposure to fees.
With the right back-office support, you can gain clearer visibility into these recurring costs, uncover inefficiencies, and identify opportunities to reduce expenses.
A Sustainable Path to Profitability
Revenue growth is important, but it’s not the only way to improve profitability. In 2026, focusing on tax planning, cost control, and fee management will help franchise operators maintain profitability, even when external conditions make top-line growth challenging.
Strengthen Your Bottom Line with Grassi Franchise Services
At Grassi Franchise Services, we specialize in helping franchise operators maximize profitability, scale confidently, and minimize risk. From tax planning and cost control to back-office support and strategic advisory, our team provides the insights and solutions you need to protect your margins and grow your business.
Contact us today to learn how Grassi can help you achieve your financial goals and make 2026 your most profitable year yet.
Frequently Asked Questions
Q: How can franchise operators improve profitability without increasing sales?
Franchise operators can improve profitability by focusing on areas they directly control, such as tax planning, labor and inventory management, and recurring operating costs. Small adjustments to cash flow strategy, prime costs, and fee structures can help boost margin health.
Q: What accounting services are most important for franchise businesses?
Franchise businesses benefit most from accounting services that provide real-time financial visibility, multi-unit reporting, payroll and sales tax compliance, and vendor and payment reconciliation. These services help operators understand where money is being spent and make informed decisions across locations.
Q: Why is tax planning important for franchise owners?
Tax planning helps franchise owners manage cash flow, strategically time deductions, and align financial decisions with growth or succession plans. When approached proactively, tax planning can free up capital for reinvestment and reduce unnecessary tax exposure.
Q: How can Grassi Franchise Services help franchise operators improve profitability?
Grassi Franchise Services helps franchise operators gain clarity into their financial performance and identify opportunities to protect margins. Through integrated accounting, tax planning, and advisory support, Grassi provides real-time financial visibility, multi-unit reporting, and proactive guidance that helps operators control costs, manage risk, and make more informed decisions as they grow.
