I recently returned from a week-long franchise industry meeting.
Three Big Takeaways on Franchise Trends in 2022:
- Labor is no bigger a challenge than it’s always been, it’s just handled differently.
- Manager-run options are becoming more plentiful.
- Capital companies are investing in franchises like we’ve never before imagined.
Labor is no bigger a challenge than it’s always been, it’s just handled differently.
The flow-through numbers of prospect names-to-applications-to-interviews-to-hires-to-retention really haven’t changed that much. The same biggest problem for business owners/operators during my earliest days in business is the same biggest problem experienced today. Some franchisees address it head-on, and others don’t. The data says that employee attraction and retention is a behavior-driven event, led by the business owner, the SBU leader, or the division or office manager. The same behavioral approach that allowed me to drop my employee turnover rate from 84% to 14% from one quarter to the next still applies today.
Employees have always wanted the same things: fair set expectations with suitable challenges and rewards, an upwardly mobile path, honest communication, appreciation, and respect… only now employers are being forced to provide it to them, or the employer will struggle or fail. Imagine that…?!
Note: Comparing the two quarters when my employee turnover rate was cut from 6/7 to 1/7 in the course of just 3 months, the labor hours I paid decreased by more than 12%, but the revenue I brought in increased by over 8%! Employees made more money during fewer hours of work, while my business made more money in less time.
Manager-run options are becoming more plentiful.
In 2015, there were only a few “good” manager-run franchise options that required less than $250K ($100K of which would be cash) in total investment. Today, the number of those options is booming! Systems have been improved upon repeatedly, and new executive-minded franchisees (people like you) have continued to exercise proven franchise business systems provided by the franchisor, while also implementing new ideas in small chunks to find the complete package that works for them. Validation is strong for such in the same old storefronts (read: higher investment at $250K or greater) where it’s always been strong, but manager-run success is now also being proven repeatedly in non-storefront, service-based businesses where customers are plentiful, prices are fair, wages are strong, and EBITDAs are very attractive.
Capital companies are investing in franchises like we’ve never before imagined.
They are contributing millions of dollars to staffing and support improvements the day they take over. Of my placements in 2017, only 1/6th joined a franchisor that was controlled or partially-owned by a capital company; in 2021, that result shot up to 2/5ths… from 16% up to 40% of my placements are becoming involved with franchisors supported by mega-million or billion-dollar capital companies who aim to improve financial outcomes. Great franchisors have always been investing in their people and systems, however today the changes are happening with rocket speed and in all directions.
