When the labor market is tight and economic uncertainties loom, franchises feel the pinch, especially with some of the highest employee turnover rates, particularly in quick-service restaurants (QSRs). This situation underscores the urgent need for more effective employee retention strategies.

Despite wage growth, retention challenges persist, indicating that franchise employees need additional incentives to stay. Workforce education programs are gaining attention as a compelling remedy, offering franchise owners a way to maintain a stable and skilled workforce.

Many franchisors already offer workforce education programs – it’s simply up to the franchisee to opt in and tailor the program to suit their own workforce needs and aspirations. But why should they?

What’s at stake

High turnover rates are a well-known issue across franchise businesses. Only 54 percent of QSR employees remain after 90 days of their start date. This constant churn disrupts operations and negatively impacts customer satisfaction. In fact, a recent survey revealed that 63 percent of customers believe that restaurants are increasingly understaffed, which reflects customer dissatisfaction with poor levels of service spurned by turnover.

With high turnover rates and decreased quality of service, franchises can easily take a hit. Hiring and training new employees is expensive and results in lost productivity. However, data shows that franchises offering workforce education programs have higher retention rates, which saves businesses money in the long run.

Investing in employee education can also give franchisees an advantage over competitors. In an industry in which consistency and brand experience are critical, this focus on talent development can result in a more committed and skilled workforce that is willing and able to uphold a high standard of service, ultimately improving the bottom line.

Imagine one franchisee opts in for an education program and another nearby franchisee, which is under a different owner, doesn’t offer such programs. If the location offering education attracts and retains better talent, the other location will likely suffer.

How it works

Workforce education programs are evolving to meet franchisees where they are. The one-size-fits-all offerings previously provided by franchise parent companies are increasingly obsolete. Franchise organizations now recognize this dynamic and are offering customizable education programs to meet the diverse needs and goals of their franchisees. By allowing franchise owners to tailor education programs to their specific location, budget, and context, these organizations encourage greater employee participation. In other words, flexibility is a key ingredient for program success.

Equally important to the flexibility of a workforce education program is its accessibility.  Franchisors from McDonald’s to KFC have embraced an upfront tuition model for this reason. Unlike traditional tuition reimbursement programs which require employees to pay upfront and get reimbursed later, modern tuition assistance programs pay upfront tuition costs to the academic institutions directly. This approach makes higher education more accessible, encouraging employees to participate and advance their education and careers without the financial burden of waiting to be reimbursed. Considering half of Americans have less than $500 available in their savings accounts, a reimbursement-based program is a major deterrent to participation.

A franchise might partner with local colleges or online education providers to offer courses relevant to the industry, such as business management, hospitality, or culinary arts. By opting into their franchisor’s education program, franchisees extend opportunities to their employees to enroll in these programs with the assurance that their tuition will be covered, allowing them to focus on their studies and career development.

Returns on investment

The costs associated with tuition assistance, certifications, and other education initiatives can be daunting for some franchisees. Concerns about the immediate financial impact and return on investment are natural.

Fortunately, the results from these programs often far exceed their costs. For example, a franchisor in the logistics industry found that employees enrolled in an education program had 40% higher retention rates than their non-participating peers. This immediately reduced hiring rates and associated costs. Considering the cost of frontline employee turnover was estimated at $5,864 per employee in 2016 (approximately $7,664 in today’s dollars), the savings from higher retention add up quickly.

Employee engagement also improves, benefiting the entire franchise. In a survey of employees with available education benefits, 82% agreed that offering education improved their view of their employer. These advantages accrue to the franchise owner, with education programs typically generating a threefold return on investment over the first three years.

 

Final thoughts

Implementing workforce education programs can seem challenging, but the benefits are substantial. By investing in education, franchises can improve retention, boost morale, and enhance productivity. In an industry in which consistency and brand experience are crucial, these programs can have a substantial effect on both the top and bottom lines.

Because ultimately, if you invest in your workforce, they’ll invest back in you.

Bio: : Craig Maloney, Chief Executive Officer at InStride. Craig is a seasoned leader with a proven track record of achieving profitable growth and creating shareholder value. He has extensive experience in the benefits and healthcare space and deep domain expertise in SaaS and tech-enabled services. Before joining InStride, Craig held executive leadership positions at Maestro Health (CEO), Benefitfocus (EVP), Hewitt Associates (Divisional CEO), and Aon / Univers (President / COO), where the focus was on growth programs and value-based solutions across SaaS and tech-enabled service models.