Diana Mead, JD
Partner, Co-President of Grassi Franchise Services

Laura Wright, CFA
Partner, Franchise Business Development Leader

Franchise and restaurant operators face a mix of new opportunities and lingering challenges. Cooling consumer spending, a tight labor market, and high costs continue to squeeze margins.

But protecting profitability means more than focusing on sales alone. By identifying missed opportunities, unnecessary spending, and hidden charges, you can strengthen margins and position your business for its most profitable year yet.

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. Consider these strategies in 2026:

• Higher Section 179 Expensing Limits: Deduct up to $2.5 million on qualifying equipment and vehicle purchases.
• 100% Bonus Depreciation: Fully expense eligible large purchases in the year they’re placed in service.
• Expanded State and Local Tax (SALT) Cap: A temporarily increased SALT cap of $40,000 may reduce pass-through tax exposure for owners in high-tax states.
• Increased Estate Tax Exemption: An increased estate and gift tax exemption of $15 million may provide greater flexibility to transfer or sell ownership while minimizing tax exposure.

Waiting until year-end to develop your strategy could mean missing valuable opportunities to time deductions and maximize their impact.

2. Control Prime Costs Without Sacrificing Quality

Managing labor and cost of goods sold (COGS) does not mean sacrificing the quality and experience customers expect. A deliberate approach to the following strategies can help control prime costs while preserving the experience that drives customer loyalty:

• Take a Data-Driven Approach to Staffing: Leverage data from POS systems, sales forecasts, and demand patterns to align staffing levels with customer traffic. Cross-training employees and building flexible schedules help ensure every labor dollar is spent where it matters most.
• Reduce Waste, Keep More: Establish regular inventory review processes to identify waste patterns and overstocking. Pair these reviews with clear portion standards, proper storage procedures, and a focus on higher-margin items.

Across multiple locations, these small adjustments can make a meaningful difference over time.

3. Address Hidden Fees That Erode Profitability

Identifying and addressing three types of hidden costs is key to maintaining healthier margins:

• Credit card processing fees: Review statements to identify interchange fees, assessment charges, and processor markups.
• Chargebacks: Look for patterns in disputes, such as unclear refund policies, fulfillment errors, or potential fraud, and address the root causes.
• Third-party delivery platforms: Distinguishing between commissions, marketing fees, and delivery charges relative to net revenue provides a clearer picture of true order profitability.

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 Franchise and Restaurant Profitability

Revenue growth is important, but it is not the only way to achieve 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.

At Grassi Franchise Services, we specialize in helping franchise operators maximize profitability, scale confidently, and minimize risk. Contact us today to learn how Grassi can help you achieve your financial goals and make 2026 your most profitable year yet.