The Biggest Employment Trends Affecting Franchising in 2023

The Franchising@WORK Benchmark Report from Franchise Business Review, conducted earlier this year, shows that employee engagement levels in franchising are the highest since 2018, but burnout and retention remain top concerns for franchisors.

Employers across all industries and regions are facing unprecedented challenges with hiring. A tight labor market, changing job requirements, and a shift in job-seeker priorities are the leading factors, according to LinkedIn. Work/life balance, job flexibility (i.e., remote or hybrid work), higher wages, and meaningful work have become top priorities for employees. Data from the U.S. Chamber of Commerce shows the number of job openings exceeds the number of job seekers by roughly 4 million.

So, it’s not surprising that franchise executives surveyed by Franchise Business Review cited hybrid work, talent shortages, and employee stress/burnout as the three most significant HR challenges affecting franchising. There are some bright spots for franchising, though. Fifty-nine percent of franchise leaders report that recruitment at the corporate level has gotten better compared with a year ago. However, they say, talent shortages continue to be a top challenge, particularly at the unit level.

Additionally, overall employee engagement in the franchise sector remains extremely high. Data from FBR’s most recent Franchising@WORK Benchmarking Report of more than 6,000 franchise employees (40% corporate staff and 60% unit-level employees across nearly 180 franchise organizations) shows 86% of corporate franchise survey participants find their work rewarding and satisfying, and four out of five employees would recommend a job at their company to a friend. This is a 4% jump from last year’s already high engagement levels, and far exceeds engagement studies from Gallup and other organizations that report general employee engagement at below 40% in many industries.

Workplace trends in franchising: What the data revealed

The full findings of the Franchising@WORK research were released in June 2023 and revealed key trends that franchise employers should be aware of in today’s war for talent.

1) Training, supporting, and measuring manager effectiveness makes a real difference

In our 2023 Franchising@WORK survey, 84% of respondents rated their managers positively on four key criteria:

My manager cares about my success.

My manager is professional, positive, and effective.

My manager and I can communicate openly.

My manager values my ideas and feedback.

The importance of great managers can not be understated. On the single question of “My manager cares about my success,” positive responders were three times more likely to refer a job candidate to their company, and four times more likely to stay long-term.

2) Supporting employees’ emotional well-being is critical to recruitment and retention

Stress and anxiety have been on the rise in recent years, and the mindset of your employees has a direct impact on their performance. According to the National Institute of Mental Health, one in five adults experienced some level of anxiety disorder in the past year. These numbers are even higher among women and the younger generations.

Historically, U.S. companies haven’t paid much attention to the mental health and well-being of their employees, but that is changing as organizations everywhere are struggling to recruit and retain the best talent. Hybrid work/flexible schedules, mental health days, counseling services, yoga and gym memberships, and wellness stipends are just a few of the wellness benefits that more and more franchisors are offering employees to help relieve stress and provide a better work-life balance.

The good news is that 88% of employees who participated in the survey rated their overall well-being as good or great. That said, every organization has employees who are currently struggling with an anxiety disorder, and companies need to do more to monitor and support their team members to be successful.

3) Diversity, equity, and inclusion (DEI) is becoming a focus for an increasing number of companies

There is overwhelming evidence that diverse teams and companies that promote inclusive cultures perform at a higher level. This year, we added seven new questions to our survey to help measure DEI efforts across the franchise sector. Overall, 84% of employees surveyed say their company values diversity. Additionally, 86% of employees feel their co-workers demonstrate a commitment to creating an inclusive work environment, and 83% feel senior management understands that diversity is important to the company’s success.

While overall feedback related to DEI initiatives was very positive, nearly one third of employees thought that company training programs could do more to promote inclusivity.

4) Clear measures of performance, better communication, and employee recognition are areas of opportunity

As in past years, employees at franchise companies would like to see better measures of individual performance, clearer communication from leadership, and more individual recognition for a job well done.

While these areas scored higher compared with many industries, they were among the five lowest-rated areas of the survey. The good news for franchise companies is that managers and leadership can easily influence these areas without a significant investment of time or resources.

Rounding out the lowest-rated areas, one-third of employees surveyed felt that they are under-compensated for their position, and one in four indicated that they did not see a long-term career opportunity at their current company.

5) Hybrid work is here to stay

Sixty-four percent of franchise businesses we surveyed are operating under a hybrid model. Remote and hybrid work environments certainly have pros and cons. Employees argue for the benefits of greater flexibility, improved productivity, and better work-life balance. Many franchise leaders, however, aren’t sold. Thirty-six percent said that hybrid work is the top challenge they are facing. Finding the right balance with remote work flexibility—and its potential impacts on organizational culture, employee recruitment, and retention—will continue to be a challenge for franchise organizations for the foreseeable future.

The impact of culture on employee recruitment and retention

With more employees than ever before looking for meaning, purpose, and a broader social connection from their careers, franchise companies that find creative ways to demonstrate a positive culture and be more transparent, open, and genuine about their mission and values will have greater success recruiting and retaining top talent.

The easiest and most effective way to demonstrate your organization’s culture is to survey employees annually, at minimum. Not only does a survey itself show employees that company leaders care what they have to say, the resulting employee satisfaction data is a powerful message to share with job candidates. On the other hand, data that is not so positive provides clear, actionable areas you can address to improve or enhance your recruitment and retention strategies.

Eric Stites leads FBR’s research and consultants with clients in the area of franchise performance. He is an active member of the IFA, serves on the IFA’s VetFran and Franchise Relations Committees, and speaks frequently on topics related to franchise relations and best practices in franchising. For more, visit FBR’s website.