In the dynamic world of franchising on both sides of the Pacific Ocean, success hinges on more than just a solid business model and a recognizable brand. One of the most critical factors that can make or break a franchise’s prosperity are its employees across all parts of the network.
The right team can propel a franchise to new heights, while inadequate staffing can lead to missed opportunities and dissatisfied customers. In this post, we will explore the importance of staffing for the franchise sector, with a focus on the return on investment for talent acquisition for your marketing spend, the necessity of having a capable team to deliver new services and the significance of employee retention.
ROI for Talent Acquisition
In the competitive franchise landscape, attracting and hiring top talent is crucial for sustained success. Research has shown that investing in recruitment strategies that identify and onboard skilled individuals can lead to significant returns. A study by the Society for Human Resource Management (SHRM) found that companies with strong talent acquisition practices experienced nearly 2.5 times higher revenue growth and 1.9 times higher profit margins compared to those with weaker practices.
In the franchise sector, where consistency and quality are paramount, having talented and motivated staff can drive customer satisfaction, repeat business, and positive word-of-mouth, all of which contribute to the franchise’s growth and profitability.
Delivering New Services and Expanding Offerings
For franchises to remain relevant and competitive, they must adapt and evolve their offerings to meet changing customer demands and market trends. This often requires introducing new services, products, or technology. Having a skilled and well-trained staff is essential for the successful delivery of these new offerings.
Staff with the necessary expertise can quickly adopt and implement innovations, ensuring that customers receive excellent service and value. Franchisors who invest in training their employees for new service rollouts are more likely to achieve a positive ROI as they attract more customers and drive revenue growth through these expanded offerings.
In the franchise sector, marketing is a fundamental driver of brand visibility and customer acquisition. However, without a capable staff to deliver on marketing promises, even the most extensive marketing efforts can fall flat.
Studies have indicated that a 5% increase in customer retention can lead to an impressive 25% to 95% increase in profits. This highlights the importance of delivering exceptional service consistently, as it not only drives customer loyalty but also amplifies the impact of marketing campaigns. Staff members who are well-trained, passionate, and customer-focused become brand ambassadors, positively impacting customer perceptions and encouraging repeat business.
The Cost of Hiring and the Importance of Employee Retention
Hiring new staff can be a significant investment for franchisors. The cost of recruitment, onboarding, and training can quickly add up. In the United States, the average cost per hire across all industries is approximately $4,129, according to SHRM’s Human Capital Benchmarking Database.
This is where employee retention becomes crucial with high employee turnover leading to increased recruitment costs and a negative impact on productivity, customer service quality, and overall morale. On the other hand, retaining skilled and experienced staff results in lower recruitment expenses and fosters a stable and knowledgeable team that drives better customer experiences and profitability.
What Do the Better Performing Franchisors Do?
While “The Great Resignation” spawned a renewed interest in entrepreneurship it has also led to challenges for franchise companies trying to acquire and retain talent to operate their businesses. 60% of franchise executives indicated that recruiting and retaining quality employees limited their growth last year and has become a top priority for most franchise companies.
Our experience here in Australia mirrors the findings of our franchisee and employee engagement partners, Franchise Business Review, in their Franchising Outlook survey of nearly 30,000 franchise business owners, thousands of corporate and unit-level employees, and hundreds of franchise leaders..
Useful initiatives from better performing franchisors include to:
- conduct engagement surveys of both franchisor and franchisee employees
- leverage specific technology to source, screen and select talent (eg: video screening, psychometric tests, reference checks)
- provide a referral fee or ‘Bounty’ to encourage employee referrals
- proactively talent pool for roles across the franchisee network
Certainly, most in the franchise sector are very optimistic about the potential for growth ahead, but there are a number of key issues, both current and on the horizon. Franchise executives understand that the success of their businesses depends highly on their ability to recruit and retain the best talent – both employees and franchise owners.