Commodity prices are up, customer counts are down, competition is fierce and credit, to help you spruce up or just carry on until times are better, is hard to come by. Many franchisees have entered a survival mode, ready to cling to whatever cost-cutting or customer-attracting strategies their franchisors suggest.

But others are meeting the crisis head-on. "It's making us better operators," says Guy Campbell, the franchisee of eight Moe's Southwest Grills in the Tampa area.

According to the National Restaurant Association's "Mid-Year Review of the Restaurant Industry & Economy," wholesale food price inflation is the highest in 27 years.

"We're watching everything, and making sure our managers pay attention to minimal things, like paper costs. Even if something is off by only 1 percent, we have to prevent that from happening again," says Durval Salema, who, with his father Antonio and brothers Shawn and Isaac, runs 15 Dunkin' Donuts franchises along the New Hampshire coast.

How franchised restaurants weather the recession depends on whether eating there "is necessary or discretionary in the view of the consumer," says Darrell Johnson, CEO of FRANdata in Arlington, Virginia. "Does your family view eating out once a week a necessary family activity, or is it something you can do without?"

Signs of brightness

While the industry reels under economic pressures, some restaurant franchises are doing just fine, such as Culver's, a 388-unit fast food chain headquartered in Prairie du Sac, Wisconsin. Chris Contino, vice president of marketing, says the chain had opened two units that day and was on track to open 20 to 25 in 2009. Culver's franchisees build freestanding stores that cost between $1.5 million and $2.5 million. Those planning new units "all secured financing on their own and are ready to go," Contino says.

Culver's franchisee Kevin Weasler, who owns stores in Palatine, Buffalo Grove and Schaumburg, Illinois, says, "We're not losing business. It's been about the same all year."

Weasler, who left a mutual fund company to become a franchisee five years ago, credits his franchisor for providing a variety of menu options at different price points for his success. (See sidebar for more survival tactics.)

The chain, which is in 17 Midwestern states, should benefit when families trade down from casual dining chains, because it offers dinners - of fried chicken, cod, shrimp, pot roast or chopped steak - beginning at $5.99.

FOCUS Brands in Atlanta, parent of Moe's, Schlotzsky's, Carvel and Cinnabon, is also still expanding and sold 50 new units in the past three months, says Geoff Hill, Cinnabon president and the multi-concept company's current head of franchise sales.

And because so many other brands have stopped expanding, FOCUS brand franchisees are often getting good deals on sites. "Certain markets, such as Arizona, Nevada and parts of the Midwest, currently offer more flexible negotiation terms than they did two years ago," says Mark Whittle, head of the company's real estate department. "Landlords in these types of markets may be more aggressive by providing concessions - six months' free rent, lease hold improvements, tenant improvement allowances or other incentives."

Finally, Steed says that the recession will drive marginal operators out of business. "Losing some seats and some locations would not be a bad thing for the industry," Steed says. "To sum it up, we are in a tough time, but good operators always seem to survive, guest by guest, and they will come through this."

Restaurant franchise survival tips

Franchisors are providing ways to help their franchisees decrease costs, increase customer counts and eke out profits in these tough times. Here are some strategies:

Combine brands

Focus is adding Cinnabon Express bakeries to 20 of its Schlotzsky's restaurants this year. Roy Thomas, who's run four Schlotzsky's in the Midland, Texas, area for 18 years, says tucking a Cinnabon station into his restaurants requires only five feet of counter space. "Business has been fantastic," Thomas says, but added that his units' location in west Texas petroleum-producing communities is also holding up sales.

Reduce unit size

Cinnabon has also designed a 120- to 140-square-foot version of its full-menu bakery, which usually requires 600 to 800 square feet of space. Early next year, Burger King will roll out Whopper Bars, scaled-down units that fit into tight spaces in airports, cruise ships and sporting venues.

Raise prices strategically

Instead of raising prices across the board, Moe's executives are analyzing the pricing of competitors within each geographic region. "If I have to raise my prices, they'll tell me how much I can move on each item without losing customers," says Moe's franchisee Guy Campbell. "It's all about marketing on the margins. Where can we make a few pennies more profit?"

Introduce limited time offers

Moe's Southwest Grill recently offered a chili cheesesteak burrito, made from ingredients franchisees already had in stock. On weekday afternoons, from October 1 to November 11, customers of Dunkin' Donuts will pay only 99 cents for a small hot or iced latte. Through November 4, Culver's customers can "vote" for their favorite presidential candidates, by ordering Republican (hot fudge and Reese's peanut butter cup chunks) or Democratic (caramel sauce and Heath toffee bits) custard sundaes.

Dunkin' Donuts franchisee Durval Salema says of another limited time offer - a 99-cent egg and cheese sandwich - "We didn't make much money there, but we hoped the deal would get customers to buy a coffee while they're here and come back another time."

Shed expensive menu items in favor of those with higher margins

This year, Panera Bread dropped its Crispani pizzas, which were expensive to make, and added higher margin grilled breakfast options. Subway is also looking to offer breakfast and will give franchisees the option of opening earlier and selling egg sandwiches. Wendy's, too, is experimenting with breakfast items.

With the exception Carl's Jr. and Hardee's brands, which announced in September it would stick with its premium offerings, including a $6 Prime Rib Burger, most casual-dining and fast-food chains are offering value meals. Chili's has a "Bottomless Express Lunch" of soup, salad and tostada chips for $5.99. Applebee's 'Pick a Pair' lunches also start at $5.99, and include two choices from a selection of soups, salads and pasta. Subway will continue its $5 foot-long subs. McDonald's, Burger King, Wendy's and their smaller rivals all offer a burger item for about $1. In addition to a $2.99 'Snack Pack,' (burger, small fries and small drink), Culver's franchisees can offer a one-day $1 ButterBurger sale, to celebrate a special occasion, like the restaurant's anniversary.

Target different customers

At the end of September, when Triarc finalized its purchase of Wendy's, Ronald Smith, the new president of both Wendy's and Arby's, announced that the burger chain would change focus, from younger customers to 24 to 49-year-olds. Just as perplexing, some Subway units are offering pizza while Domino's is selling sub sandwiches.

Reduce costs

Like the purchasing and distribution managers at most chains, Focus Brand's Rich Kamph is working to drive down the cost of goods. Kamph says, "By consolidating orders across our brands, we lowered the cost of all 12-pound paper bags by 14 percent." To offset the fluctuating cost of commodities like flour, Kamph locks in long-term contracts with vendors.

Franchisees face a "double-edged sword" when trying to reduce labor costs. "Because we still want to provide the services our customers expect. We're making our employees more productive while they're here, by assigning them specific duties each day," says Moe's franchisee Campbell.

Go green

Finally, franchisees are embracing environment-friendly practices, perhaps to help the planet, but definitely to help their bottom lines. Some are selling their fry-oil as biofuels; others are switching to cost-efficient lighting. "We're watching the air conditioning, turning off the gas in the afternoon and questioning how much clean linen we need every day," says Campbell. "By honing in on all our costs, we are becoming better operators."