It’s no secret that high turnover can negatively impact businesses, but this impact goes far beyond the time, effort, and money it takes to constantly be hiring. The revolving door of “Welcome” followed by “I Quit” can not only impede the success of individual franchisees, but it can significantly impact an entire franchise system – even when isolated to a few locations.
According to the International Franchise Association’s 2024 Franchising Economic Outlook report, the franchise industry is expected to add 221,000 jobs this year, for a total of 8.9 million people employed by franchised businesses.
Even so, some franchisees are experiencing the effects of dissatisfied employees and high turnover. In our annual Candidate Experience Report, we found that 49% of employees across multiple industries have thought about leaving their jobs in the last year.
The impact of high turnover on business operations
In addition to managers and franchisees, a system’s Franchise Business Consultants, field coaches, and operations leaders are likely to experience some of the most glaring effects of high employee turnover.
Turnover affects the entire franchise system, and more than likely, you’ve already felt this in your organization. Let’s take a closer look at the impact.
Losing experienced employees
Smooth operations require many moving parts, from integrated technology to teamwork, but one thing is for certain: experienced employees matter.
That is not to say that many franchises do not or should not employ individuals new to the workforce; it is simply to say that those who have solid training and learn on the job oftentimes become excellent leaders, mentors, and examples for new employees.
Think about the growing pains that come along with opening a new location. Most of the time, even with the most well-prepared teams, it takes a bit to get “into the jive” of things, and each team learns how they can improve operations as they go. They can then share the valuable insights they’ve learned along the way with new employees – that is, of course, if they are still working there.
Staffing shortages
High turnover may also result in significant staffing shortages. It’s only been a few years since the great labor shortage, one which was particularly felt by the food service and hospitality sectors. Staffing shortages create an added strain on your business, impacting your existing team and potentially creating poor customer experiences.
How turnover affects the customer experience
Speaking of the customer experience, Chief Marketing Officers and Directors of Customer Experience may also experience the effects of high employee turnover.
Oftentimes, work culture and the customer experience go hand in hand. When employees are unhappy, there is usually little motivation to perform at a high standard. This can mean a lapse in brand and operational standards, as well as customer service.
According to one survey, “85% of respondents agree that an improved employee experience and higher employee engagement translate to a better customer experience, higher customer satisfaction, and higher revenues for their organization.”
Plus, the businesses that are the most personable drive the most loyalty. When a regular customer stops in and the same employees are helping them each time, they begin to recognize each other and oftentimes, form casual relationships. When your turnover rate is high, it’s impeding on this crucial component of the customer experience – one that can set you apart from competitors.
Not only is customer experience important to drive loyalty, but in a digital age when customers can leave a public review within a matter of minutes, it is essential to maintain a positive reputation, or employer brand. Even a few locations with bad reviews can impede on your franchise’s success.
High turnover and franchise development
On the franchise development side, it is common to explore qualifying factors in franchise leads such as financial stability, (sometimes) business experience, and similar values. While most franchises offer leadership training for new zees, qualifying prospective franchisees as employers may not always be top-of-mind.
Consequently, any franchise development leader will tell you that due diligence is important on both sides. Remember that franchisee candidates are doing their research, too – as are the brokers and consultants helping them in their journey to entrepreneurship.
The last thing you want is for prospective franchisees to Google your locations near them and see a slew of negative customer or employee reviews that are stemming from high turnover, staffing shortages, and poor experiences.
High turnover and profitability
In business, one of the best ways to boost profitability is by maintaining control of your expenses, and high turnover comes with a price. It’s estimated the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary.
Finances are just one part of this price. Think of the time and effort hiring, onboarding, and training new employees can take. Not only can this add a lot to an FBC, field coach, manager, or franchisee’s plate, but sometimes, marketing and external partners may be needed to help recruit new employees or do “damage control” on bad press or reviews.
What can franchisors do about it?
A robust franchisee support program is essential to overall success, and equipping franchisees to build and retain high-performing teams can do wonders for your franchise system.
Join me and our group of expert panelists, Clint Smith, Angela Coté, and Scott Greenberg on August 15th at 12pm Central (1pm EST), for our Retention Revolution webinar series, where we’ll provide more insights on how you can empower owners to drive employee satisfaction through onboarding and beyond. Register today!
About the author
As the Senior Marketing Manager of Partner Acquisition at CareerPlug, Lizzy leverages her franchise experience and entrepreneurial background to help franchisors and business networks equip their owners to build and retain high-performing teams. As a Certified Franchise Executive and a Top Franchising Voice on LinkedIn, she enjoys serving as a resource to executives, individual business owners, and fellow suppliers.
