Employee Retention Strategies for Franchisees: Keeping Your Team Happy

Being a franchise owner means constantly juggling tasks. And while you’re managing the operations of the unit and keeping up with brand guidelines, you’ll also likely be battling with employee turnover.

Employee retention is a constant (and costly) frustration for most franchisees. If you feel like you’re constantly seeing good team members leave after investing time and resources into coaching them, you aren’t alone.

In this article, I’ll discuss some practical strategies to boost employee retention rates and build a loyal, highly motivated team around you.

Key Takeaways

• It’s hard to overstress the importance of employee retention. High turnover drains resources and damages profitability, team morale, and customer service.
• Unfortunately, franchises tend to have a high turnover rate due to decentralized management, legal constraints, and the low-level nature of many franchise roles.
• Focusing on your hiring and onboarding practices can significantly improve staff retention.
• Creating growth opportunities for employees, promoting from within, and incentivizing good work can help to keep a stable team.
• Valuing employees as people, rather than just cogs in a machine, makes them stick around: it’s wise to offer flexibility, perks, and support their work-life balance.

Why Retention Is Especially Tough for Franchisees

Franchise owners regularly face high turnover in their business. This is because the most common franchise industries like food service, retail, and fitness rely heavily on entry-level or part-time roles where employees often cycle in and out quickly.

The restaurant industry, for example, has a whopping turnover rate of 75%, compared to a nationwide average of just 25%.

As a franchisee, you probably feel the impact of this on a daily basis. You might be constantly stuck in the cycle of hiring and training new employees. You’re probably also familiar with the disappointment of good employees walking out the door just as soon as they’ve gotten in the swing of things.

There are a few key drivers behind high turnover in franchise businesses:

Decentralized Management and Inconsistency 

If you’re operating multiple units or are an area developer, you can’t be everywhere at once. You’re likely relying on individual store managers to keep morale up, which inevitably leads to some degree of inconsistency. On top of that, there may be aspects of employee management, such as compensation structures or scheduling, that are dictated by the franchisor, leaving you limited when it comes to making improvements.

Legal Constraints

As a franchisee, you’re in a bit of a double bind: you must adhere to franchisor rules and brand standards, but the franchisor can only help so much with HR issues before you run into legal problems around “joint employers.” This can limit franchisor support when it comes to managing employees.

Worker Alienation

It can be hard to build loyalty if your employees feel removed from the business. This is less of a problem in independent businesses where staff are more likely to have personal relationships with their managers. But it’s a common problem in franchising.

Wage Pressure

Franchises face a lot of competition, leaving franchisees under significant wage pressure. Margins are often determined by brand standards, leaving you less wiggle room to adjust them as you see fit.

Seasonality

Depending on your industry, you may need more staff at certain times. For example, if you’re in retail, you’ll usually need more staff at Christmas. This results in temporary hires, which creates a “revolving door” atmosphere in which it’s normalized for employees to come and go.

While it’s definitely tough to tackle retention as a franchisee, retention is becoming more of a challenge for employers in general. In the US, record numbers of people quit their jobs in 2022. Due to low unemployment, employees know they have options, so if they feel unhappy or underappreciated, they know they can look elsewhere.

Top Franchise Employee Retention Strategies

1. Hire the Right Staff

The best retention strategy is to simply hire the right staff. Bringing people on board who are good fits for the job and your team culture will save you major headaches in the long term. 

Look, I know the situation: often, you’re in a hurry to hire. You need people, and you need them fast. But try to rein in the impulse to take the first person that comes along, because a poor fit can end up draining your unit’s resources. In fact, a bad hire is estimated to cost as much as 30% of the employee’s first-year earnings.

I always recommend investing the extra effort to screen for high-quality candidates. Hire for attitude and reliability as well as previous experience. It helps to ask scenario-based questions at an interview to get a sense of how they’d deal with a real-life situation (for example, how they would respond to a customer complaining).

Another tip for hiring is to be upfront with the candidate. Tell them if it’s going to be hectic or if the learning curve is steep. If they go in with realistic expectations, they’ll be less likely to bail.

2. Start Every New Hire on Solid Ground

How you welcome and train your new hires in the first days and weeks is crucial to determining whether they’ll stick around. After all, a huge percentage of staff turnover happens in the first month and a half, as much as 20% according to some reports! 

If a new employee feels overwhelmed, unsupported, or like their expectations don’t meet reality, they’ll likely quit pretty quickly.

A structured and well-designed onboarding process should mitigate these problems. It will help new team members feel competent and connected to the team and franchise brand, making them more likely to stay.

The good news is that most franchises offer a standardized onboarding program, but I also advise you to adjust it to fit your specific franchise location and territory.

When onboarding new hires, set clear expectations and, if possible, be present to answer questions personally. Sometimes it also helps to pair the new person up with a buddy or seasoned employee.

3. Create Clear Paths to Advancement

One of the biggest reasons employees quit is that they lack opportunities for growth. 

Franchises have a bad reputation for offering dead-end roles. Tackle this assumption by providing clear career paths in your business. Even in a small franchise unit, this should be possible. Every store needs managers. It helps to outline levels of progression from the get-go, e.g., shift leader, assistant manager, store manager, regional manager, and so forth.

4. Offer Flexible Scheduling and Perks

How you handle scheduling can have a huge impact on your retention rate. Flexible scheduling is now considered a major perk, especially in the post-pandemic era. Many employees will pick jobs that accommodate other life responsibilities over ones that don’t. 

Start by asking employees their preferences: parents might prefer day shifts, while college students might prefer nights. A scheduling app or system, often offered by your franchisor, will help make this easier and can allow employees to set their availability and swap shifts easily.

Fairness is crucial, too. Rotate undesirable shifts so the same people aren’t stuck with them over and over. Small concessions can have a bigger effect than you think on employees’ goodwill and loyalty.

Other low-cost perks, such as free meals during shifts and employee discounts, can also make your franchise a more attractive place to work.

5. Keep Communication Open and Two‑Way

In the fast-paced franchise world, communication is often an afterthought. Front-line employees are usually the ones interacting with customers and executing the day-to-day work, so it’s not uncommon for there to be a disconnect between them and the management.

If you’ve been in the franchise game for a long time, you’ve probably seen it happen: employees becoming disillusioned by the faceless nature of management.

An affordable and effective retention strategy is to organize sit-downs with your employees and actually listen to them. Create formal and informal feedback channels, such as suggestion boxes or quarterly check-ins.

The key here is to generally make yourself more approachable. Create an open-door policy and make sure your staff feel safe bringing ideas to you.

6. Build a Recognition‑Rich Culture

One thing you can do to immediately boost morale (and retention) is to recognize and reward your employees.

You don’t need to do big award ceremonies or offer huge bonuses (though these can help). Simply start by giving frequent, sincere praise when you spot an employee doing a good job. It sounds simple, because it is. But this strategy can have a pretty major impact. According to research data by Gallup, employees who receive high-quality recognition are 45% less likely to leave their organization within two years. 

Make it a habit to say thank you, especially if you’ve noticed somebody handling something well, whether it’s rush hour or a customer complaint.

7. Promote From Within When Possible

I’ve already talked a bit about the importance of implementing advancement opportunities for your team. And promoting from within is an important part of realizing that strategy.

When employees see their colleagues move up the ranks, they will see a clear pathway from entry-level roles to more senior positions. Promoting from within boosts retention and, in my experience, leads to more effective management. This is because a manager who once worked an entry-level role in your unit has a better understanding of the business and the people.

When a position opens up, look around and see if anybody on the team might be a good fit (even if it requires a bit of extra coaching). I also recommend announcing and celebrating promotions so that everyone in the unit knows that good work gets rewarded.

8. Explain the “Why” Behind All Tasks

If you’ve ever been told by a boss to do something that doesn’t make sense, you’ll understand why this saps motivation. In franchise operations, there are often protocols that can seem arbitrary and pointless, which leads to employee frustration.

When you’re training and coaching new employees, take the time to explain why things are done in a certain way. 

For example, when you instruct them to clean the coffee machine every night, explain why it’s so important. This helps employees feel connected and part of the team, rather than just being told what to do.

9. Incentivize Top Performers

Obviously, a paycheck is the main incentive to work, but additional rewards for good performance can give an extra boost, both in terms of engagement and retention.

This is a little different from offering recognition or promotions: you can also implement other programs or schemes to encourage people to work harder and stick around. I’ve seen franchises set up contests around metrics such as service speed or upselling, in which employees receive a financial bonus or other kind of reward (such as a gift card) if they perform well.

10. Cross‑Train to Keep Roles Interesting

A lot of franchise operations include repetitive roles such as operating the cashier or flipping burgers. For the vast majority of people, monotony lessens engagement and prompts them to consider other options.

It’s a tricky balance. Strict specialization is convenient, and the franchise concept hinges on repetition and these divisions of labor. But when you’re working with people, you also need to consider human needs.

One thing I find works great is cross-training. This means training your staff to handle multiple positions or tasks in the same location. Cross-training allows employees to gain new skills and staves off boredom. 

For example, you could train your cook on the cash register, or start coaching your service staff on basic management principles.

11. Train Your Managers to Be Retention Leaders

You are not the only person who impacts your unit’s retention rate. In a franchise setting, managers or supervisors also play a role in whether or not employees stay on. So, it’s important to train your managers to be good leaders who inspire loyalty.

This means choosing managers who not only have operational knowledge but also the right personality for leading. Additionally, invest in training programs to improve their people-management skills.

In my view, one of the most important elements of training your managers is teaching them how to communicate. Many new or younger managers struggle with having tough talks (such as correcting bad behavior) or with actively listening to employee feedback.

12. Support Work‑Life Balance

Burnout is a major driver of turnover, so it’s something you want to avoid. Ensure your employees get adequate rest. Always respect their lives outside of work and make sure they know you value their well-being. 

Something I’ve seen often is franchisees employing a more “old-fashioned” approach to managing employees. They expect their staff to value work above all and neglect outside responsibilities when asked. But in an age where unemployment is low and employees have other options, this will inevitably backfire.

Encourage staff to take breaks and use their vacation days. Don’t create a culture where staff feel guilty about taking paid leave. In the short term, this might seem like a good thing, but in the long term? People burn out and leave for better horizons. At the end of the day, staff with a good work-life balance are more likely to want to stay with your business and will be motivated and perform better. Employees who rate their work‑life balance highly are 10% more likely to stay at their company.

13. Hold One‑on‑Ones With Every Employee

I highly recommend carving out a little time for one-on-ones with your team members. Personal touches like this make your staff feel valued and heard. 

These meetings don’t have to be long: honestly, just 15 or 20 minutes can suffice. Ask them how they’re doing and invite their honest feedback. 

If someone is unhappy, it’s important to hear why. That way, you can try to make changes going forward. 

The Cost of High Turnover in a Franchise

Some franchisees think of high turnover as inevitable and don’t even bother trying to mitigate it. They cut their losses and continue, unfazed. 

The fact is, the impact of high turnover has ripples you might not realize. Here are a few final reasons why high turnover is potentially damaging for your business:

Financial Costs

When an employee leaves, you incur expenses. When you add up the costs of finding a replacement, advertising the job, reviewing each applicant, conducting interviews, and training, turnover costs you more than you might think. Cycling through employees hurts profitability, and many companies lose up to 25% of their labor budget replacing people.

Productivity

When somebody leaves, efficiency in daily operations suffers. Either there is nobody to replace them, or the role will be filled by somebody inexperienced who is going to take time to learn the ropes. During this time, mistakes might be made and service may be slower. Franchises often have high numbers of new staff at any given time, but it’s not the best position to be in. Your business will run more smoothly with experienced hands on deck.

Decreased Morale

I always emphasize to franchisees the value of building a strong team culture, and to be honest, it’s difficult to do that when nobody sticks around for more than six months. Constant turnover and understaffing breed an unpleasant work environment, and that’s not good for productivity.

Poor Customer Experience

In general, higher employee satisfaction leads to higher customer satisfaction, and a high turnover means your staff probably isn’t very happy. New staff simply don’t know the business as well: they’re likely to be less confident and less knowledgeable than seasoned team members. They might make errors or appear inexperienced, which can lead to customer frustration and complaints. Familiar faces on the team also help to build customer loyalty, so if the team is rotating constantly, people are less likely to come back.

Build a Workplace People Don’t Want to Leave

Keeping great employees shouldn’t feel like a constant uphill battle for your franchise location. While high turnover is common in franchising, it’s not inevitable. When you invest in better hiring practices and create a more supportive day-to-day environment, you give people real reasons to stay.

At Franzy, we help future franchisees make smart, confident decisions from day one. If you’re still exploring brands and feel a bit bogged down in the process, we’ll guide you through the process and connect you with opportunities that match your goals. Let’s get you started on the right path.