FRANdata blog: How Franchising is Navigating a Tight Labor Market

Among the many issues brought about by the pandemic’s effect on small business ownership has been the persistent challenges in the labor market. Adding to this obstacle is the Great Resignation, in which nearly 50 million employees voluntarily left their positions in the workforce. Many opted for a bigger, better deal in the marketplace, but a good deal of workers altered their trajectory by choosing a career transition. A couple of the industries with the tightest of labor markets include popular franchising categories such as food/beverage and hospitality.

To gain a better understanding of the problem, and determine strategies to overcome it, the International Franchise Association (IFA) and FRANdata, a valuable partner of FranNet, recently conducted a survey. In all, they received responses from executives representing nearly 200 different brands that account for an estimated 90,000 units. The results were published in a joint report, “Identifying & Addressing Today’s Labor Challenges: A 2022 Study on the Impact of Labor Shortages in Franchising.” Taken from this report, here are some of the key findings:

It’s a Widespread Problem

Four out of five franchisors reported having labor shortages in their respective industries, a point conceded by FRANdata CEO Darrell Johnson, who also noted the effect of franchising’s business model in mitigating the problem. “While ‘quality of labor’ is the most critical problem facing franchise businesses today, franchising is resilient and strong, as shown in the efforts made to adapt to current labor challenges during the economic recovery. One of franchising’s biggest strengths is the emphasis on extensive training programs that encompass not just technical skills but also career-enhancing fundamental skills.”

Franchising Industry Answers the Call

Whether skilled, or unskilled, most franchisors reported having trouble filling jobs, and as many as 70% experienced constrained growth because of this. But the franchising industry in general has been quick to react to this challenge. More than half increased wages for their workforce and expect further increases to solidify their labor base. Almost all respondents from franchisors reported assisting their franchisees through enhanced recruiting and retention efforts. Franchisees are responding to the labor shortage by offering sign-on and/or employee retention bonuses. Nearly half of all respondents planned to enhance their employee benefits packages.

Innovative Strategies Emerge

The nature of franchising’s business model – especially the built-in support systems – has been instrumental in mitigating the effect of the labor shortage. Among the strategies employed to fight this challenge, franchisors are getting specific. Several have implemented training recognition and achievement levels. Some have enhanced their cross-communication strategies between franchisor and franchisee. A few others have adjusted operating requirements for franchisees to ease their dependence on staffing – primarily through technology.

Of all the business challenges to deal with, labor shortfalls may be among the preferred issues, all things considered. Even though the Great Resignation shuffled the deck for every business sector, the U.S. added an unprecedented 3.8 million jobs in 2021 – a strong sign of economic growth and stability. The biggest contributing factors to labor shortages are early retirements, an increase in household savings, and a lack of childcare access. But all three of these factors play directly into the hands of the franchising industry, as many are drawn to entrepreneurship to take advantage of the freedom and flexibility that come with owning a business. Not to mention having control over income generation. You can read the IFA/FRANdata labor report in its entirety here.

If you’d like to explore the benefits of entrepreneurship based on the franchising model, FranNet can help you begin your personal journey. Getting started is simple and involves setting up a no-cost, no-obligation appointment with one of our qualified FranNet representatives. Not sure what type of business you were meant to own? That’s fine, too – you just need to reach out and talk with one of our franchise experts today! Together, we can find a business opportunity that aligns with your lifestyle and income-oriented goals.

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