Secrets to Avoiding Employee Hassles in Your Franchise
Learn how to invest your IRA or 401k into a franchise penalty-free. ($50k min)
Q: I want to buy a franchise, but I'm scared of dealing with employee nightmares. Many of the existing franchisees I've talked to tell me finding good employees and keeping them is far and away the hardest thing about being a successful franchisee. What can I do to make sure I don't end up in this same position?
A: This has been a significant topic in franchising for the past 15 years. The simple fact is that you're correct--for many franchises, this is the most difficult, expensive and time-consuming part of the franchisee role.
The only way to guarantee this is not a problem for you is to get into a franchise that does not require any employees. The problem with this solution is that such franchise opportunities are rare and may not represent the kind of business you would be happy and successful in. Most of these types of franchises are either basically sales roles (where you spend all your time selling some service to others) or businesses that require extremely specific skill sets in order to succeed and require extensive training that you can't effectively pass on to other employees in your business.
Let's assume that it's not practical for you to get a franchise without any employees. There are three secrets to minimizing this potential problem and making sure you don't experience the "nightmares" you are concerned about.
- The first thing you should do is use the employee factor to narrow down the candidate franchise companies you're going to investigate. Give some thought to the businesses you plan to look into. Do they sound like businesses that need a lot of employees? (For more information on number of employees required to run a franchise unit, read the franchise listings in Entrepreneur's Franchise Zone.) Do you typically see a "help wanted" sign in the window of this type of business? Can you call some local companies in this business to find out how many employees they have and how hard it is to recruit? Is the environment of the business more attractive than most, so people would rather work there than the alternatives that exist at comparable wage levels? These are all factors that will help steer you toward companies that might not have as much trouble with employee hassles as others.
- The second thing you should do is focus on businesses that have higher skilled or compensated employees. Look for a franchise business where the typical employee is well compensated and has benefits, where the typical employee needs some skill that is not easily learned, or, preferably, has both these factors. You will have a much better chance of recruiting and retaining employees and avoiding hassles in such a business. You'll find that the hassles associated with employee recruiting and retention escalate rapidly the closer you get to minimum wage levels in the employee ranks.
- The third secret is to ask existing franchisees of the company lots of questions about this issue when you are conducting your investigation. How many employees do they have? Is that as many as they need? How hard is it to get good employees for the business? How much money do they typically spend on recruiting of employees, either the actual number or the percentage of their revenue? Here's a clue: If they know this number without having to look it up, you're looking at a business with employee hassles!
Always assume your experience will be average if you become a franchisee in any system. If most of the existing franchisees are having trouble with this issue, you probably will, too. If you hear from most of them that this is not an issue in their business, you may have found a winner in this area.
One good thing to note is that these problems are not nearly as difficult for franchisees as they were a few years ago, when unemployment rate were at historic lows. Give this issue some careful thought and research, and you're more likely to avoid these problems in the franchise business you select.