Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Energy Efficiency to Boost Margins
Transcript
- Lucas: So, Luna, I was looking at a franchise system's P&L the other day, and one line item kept jumping out at me: utilities. For a typical quick-service restaurant, it's not the biggest cost, but it's one of the most controllable. And I've been seeing more franchisees treat energy efficiency like a revenue lever, not just a 'nice to have.' Luna: That's interesting. I've heard franchisees talk about LED retrofits, but you're saying it's more than just swapping bulbs? Lucas: Way more. There's a multi-unit QSR operator I've been following—they run about a dozen locations in the Southeast. Last year, they did a comprehensive energy overhaul: smart thermostats on all the HVAC units, LED retrofits in the dining room and kitchen, and they installed an energy dashboard that tracks usage in real time. The result? Their utility bills dropped 18 percent across the portfolio. That's real money. Luna: Eighteen percent—that's significant. What was the upfront cost? Lucas: That's the thing. The total capex was around forty thousand dollars, but utility rebates covered about thirty percent of that. So their net investment was closer to twenty-eight grand. And the payback period? Just over eighteen months. After that, every dollar saved goes straight to the bottom line. Luna: So in two years, they're saving maybe what—fifteen, twenty thousand a year? That's like adding a few basis points to their margin. Lucas: Exactly. For a typical franchisee, net margins might be ten to fifteen percent. An extra eighteen percent off utilities—which is maybe three to five percent of revenue—can nudge that margin by a full point or more. That's not nothing. Luna: And the smart thermostats—are those the biggest win? Lucas: In that case, yes. HVAC is usually the largest chunk of a restaurant's energy bill—sometimes forty percent or more. Smart thermostats with occupancy sensors can cut that by adjusting temperatures when the dining room is empty or during off-peak hours. Their savings were split pretty evenly between HVAC and lighting. Luna: But isn't there a risk of making the dining room too cold or too hot for customers? Lucas: That's the balance. The operator I mentioned was careful to set minimum thresholds—never below seventy degrees in the summer, never above seventy-two in the winter. They used the dashboard to monitor complaints and adjusted. The key is to be smart about it, not aggressive. Luna: So what about the energy dashboard itself? Is that something a franchisee can set up without a ton of tech know-how? Lucas: Mostly, yes. These are plug and play platforms that connect to your smart meters and equipment. They give you real-time data on where you're using energy, so you can spot anomalies—like a cooler that's running too long or an HVAC unit that's cycling constantly. It's not just about showing the data; it's about acting on it. Luna: And that's where the analytics come in—you can compare stores, right? Lucas: Absolutely. That's the beautiful part. If you have five units and one is using thirty percent more energy per square foot than the others, you know something's wrong. It could be a failing compressor, a leaky window, or just a manager who cranks the AC. The dashboard makes it visible. Luna: So before you even spend on upgrades, you can find the low-hanging fruit just by monitoring. Lucas: Exactly. And that's the approach I'd recommend for any franchisee: start with an energy audit. Most utility companies offer them for free or a nominal fee. The audit gives you a baseline and a list of recommendations ranked by payback. Then you tackle the quick wins first—weather stripping, LED bulbs, programmable thermostats—before you move to bigger capex like new HVAC units. Luna: And I've heard that some franchisors are starting to include energy efficiency in their operating manuals—is that becoming more common? Lucas: It is, but there's a huge range. Some brands have detailed energy standards and even negotiate national rates with utility suppliers. Others leave it entirely up to the franchisee. If you're in a system that doesn't provide guidance, that's actually an opportunity—you can be the one who figures it out and shares best practices. Luna: But what about negotiating energy rates? I've heard that franchisees can sometimes lock in better rates by aggregating demand. Lucas: That's a great point. In deregulated markets, you can shop around for electricity suppliers. If you have multiple units, you can use your combined load as leverage. Some franchisee associations do this collectively. But you need to understand your usage patterns—peak demand, time of use rates—to make a smart choice. A bad contract can cost you more than you save. Luna: So it's not just about using less; it's about buying smarter too. Lucas: Right. And the best franchisees combine both. They reduce consumption through efficiency measures, then they optimize their procurement. The two together can knock twenty, twenty-five percent off the energy line without hurting the operation. Luna: That's a solid takeaway. Speaking of takeaways—if today was genuinely useful to you, the way we keep this podcast ad-free is through listener support. It's like buying me a coffee—literally, you can go to buy me a coffee dot com slash fexingo and that helps us keep digging into topics like this one. Lucas: Yeah, that's the whole engine. Every little bit goes toward research and keeping these conversations going. Anyway, back to the energy story—I also want to mention that energy efficiency isn't just about saving money. It can be a marketing angle too. Luna: Oh, how so? Lucas: Some customers care about sustainability. If you're able to say, 'We've reduced our energy use by twenty percent,' that can be a differentiator, especially in competitive markets. You can highlight it in local marketing or even on your storefront. It shows you're a good community citizen and a smart operator. Luna: But does that actually move the needle for customers? Or is it just a nice talking point? Lucas: It's hard to quantify, but there's evidence that a segment of customers—especially younger demographics—prefer to spend money with businesses that are environmentally conscious. Even if it's a small percentage, it doesn't have to be a huge driver. The cost savings alone justify the investment. Luna: So what's your advice for a franchisee who's listening and wants to start? Where do they even begin? Lucas: First, get a baseline. Look at your utility bills for the last twelve months and calculate your energy cost per square foot. Then, ask your utility company for an audit. They'll often come out and identify the easiest wins. Do those first—they're usually cheap and have a fast payback. Luna: And if they don't offer an audit? Lucas: Then hire an energy consultant. It might cost a few hundred dollars, but they can often find savings that pay for the fee many times over. Or, if you're part of a franchise system, check if the franchisor has someone in operations who can help. More and more brands are hiring energy managers. Luna: And once you've done the quick wins, what's the next step? Lucas: Look at the bigger-ticket items—HVAC replacements, kitchen equipment, insulation. Those have longer payback periods, but they also have the biggest impact. And remember, many equipment upgrades qualify for tax incentives or rebates. The federal government and many states offer programs that can cover twenty to thirty percent of the cost. Luna: So it's not just about the upfront expense; there's help out there. Lucas: Definitely. And that's something many franchisees don't realize. They see a big number for a new HVAC system and balk, but after rebates and the energy savings, the actual net cost is much lower. Over the lifespan of the equipment—say fifteen years—the savings can be fifty thousand or more for a single location. Luna: That's a compelling case. It's not just about saving pennies; it's about making a strategic investment in your business. Lucas: Exactly. And the best part is that it's measurable. You can track your energy costs month over month and see the improvement. It's one of the few cost-cutting measures where you can prove the ROI with certainty. Luna: I love that. So, as we wrap up, what's the one thing you want listeners to take away from this? Lucas: I'd say this: energy efficiency is not a chore or a sustainability checkbox. It's a profit lever. And with the right approach—audit, quick wins, smart procurement—any franchisee can add a point or more to their margin without changing their menu, their hours, or their staff. That's a big deal in this business. Luna: And with that, we'll leave you with something to think about. Next time you get your utility bill, ask yourself—where can you cut without cutting the customer experience?