Why Franchises Are Funding Their Employees' Education
Here's a hint: It's really good for business.
When a customer buys something at Taco Bell, they’re asked if they’d like to round up their purchase to the nearest dollar. They’re told it helps support their employees’ education, but of course, that can seem abstract and perfunctory to someone just hungry for a chalupa. So when someone does round up their purchase at a Taco Bell in Bloomington, Ind., employee Megan Humphreys-Savell always makes a point of smiling and making it personal.
“I tell them, ‘Your donation helped me go to school,’ ” says Humphreys-Savell, 20. Those pennies have, among other things, helped contribute to a $25,000 scholarship she received through the franchise’s foundation; now she’s enrolled at the nearby Indiana University, majoring in arts education. “They’re definitely surprised,” she says of customers’ reactions. “I just don’t think they’d ever given it a second thought. I love to see their faces when I tell them that.”
Humphreys-Savell was in foster care from ages 12 to 14, when she was adopted by a family with three other children. A college degree had always seemed financially out of reach, but she was determined. It’s why she originally took a job at Taco Bell -- though she had no idea about its education benefits. At the time, she was just trying to earn some cash to pay for classes at a local community college. Then she discovered she could apply for a Taco Bell Live Más scholarship, did so, and became one of 531 people (selected from 13,000 applicants) in 2019 to receive the help.
Related: How to Find the Right Payment System
Across the franchise world, her story is becoming common. An increasing number of franchises have started to offer education benefits for full- and part-time employees, ranging from college tuition assistance to English language instruction and high school equivalency programs. And it’s happening because these businesses have discovered something seemingly counterintuitive: Spending money on their employees’ education -- and therefore providing access to opportunities far larger than their current jobs -- isn’t just good for employees. It’s also good for business.
“If you look at how competitive it is in the hourly workspace, it’s become table stakes to have these kinds of programs,” says Bjorn Erland, Taco Bell’s recent vice president of people and experience. (He left the company in October.) The results, so far, are undeniable: In a 2017 pilot at 700 restaurants, Taco Bell saw a 34 percent increase in retention over the first six months among employees who received its education benefits.
“This is the next movement,” says Rachel Carlson, CEO and cofounder of Guild Education, which helps run education programs for customers ranging from Walmart to Walt Disney and is now branching into the franchise sector.
“If the ’60s were about healthcare and the ’80s were about 401(k)s, education is the new employee benefit,” she says. “Franchises are thinking, How can we compete? And [underwriting education offers] a high return on investment.”
Here’s the statistic that tells the story: Ten years ago, employers spent $13.8 billion (adjusted for inflation) helping their employees pay for a college education. Today, it’s nearly $16.5 billion, according to the College Board. Part of that increase is thanks to a particularly sharp rise in the benefits available to low-wage workers, who have gotten harder to find and keep as unemployment rates fall.
The movement began outside franchising, in some of America’s most heavy-hitting brands. Among the first to dive in was the nation’s largest private employer, Walmart, which in 2012 offered to pick up 15 percent of its employees’ costs to attend a for-profit online university. (It has since expanded the perk by covering even more of the tab for workers who pursue degrees in business, supply chain management, technology, or health and wellness, and by adding to the number of colleges where they can do it.)
Next came Starbucks, which began to pay for the cost of degrees for its baristas through the online arm of Arizona State University. Other big businesses followed; now even Uber is offering its drivers and their relatives a free ride through ASU’s online division.
Once enough companies offered the perk, data scientists were able to track the impact on business. The results are stark. An independent study of the healthcare company Cigna ran the numbers, focusing on its reimbursement plan, which then offered up to $5,250 a year for undergraduate courses (the maximum allowed by federal law before it’s taxed as income) and $8,000 a year for graduate ones. Cigna found that for every $1 invested in education, the business saved $1.29 in management costs. Retention improved by 8 percent, and participants were 10 percent more likely to be promoted.
Those are appealing stats for businesses struggling to hire and retain employees -- and franchises are certainly struggling. In the fast-food industry alone, annual turnover is at a record 150 percent, according to the Oracle division PeopleSoft. That means a restaurant with 20 jobs has to hire an average of 30 people a year to fill them.
“It’s a tough market,” says Ron Holt, the founder of the cleaning-service franchise Two Maids & a Mop, which has more than 500 employees in 70 markets. Holt launched an education program in August that will award five of those workers with $10,000 scholarships. “These are unglamorous positions,” he says. “This gives us an opportunity to stand out.”
Of course, the opportunity doesn’t come cheap. And across the franchise world, companies are taking different approaches to financing it -- and even to who pays.
In some cases, the franchisor is paying. That’s the setup at McDonald’s, for instance, whose corporate Archways to Opportunity program pays for employees to learn English, get their high school equivalency diplomas, or go to college. “It’s very hard to attract talent in this economy,” says Marie Cini, president of the Council for Adult and Experiential Learning (CAEL), a nonprofit that advises McDonald’s employees regarding their education choices.
At Taco Bell, it depends on where the scholarship comes from. The company actually runs multiple programs (and this year as a whole distributed $4.6 million in education benefits). In some cases, scholarships and tuition reimbursement are paid out either by corporate or franchisees, depending on whether an employee works at a corporate-owned or franchised location. Sometimes, when there’s no corporate program for store-level employees, individual franchisees set up their own. That’s the case at The Wolak Group, a Maine-based company that owns nearly 100 Dunkin’ locations. Once employees have worked at one of its units for a year or 1,000 hours, The Wolak Group pays for them to earn associate degrees online through Southern New Hampshire University.
Increasingly, the talent pool isn’t just responding to these kinds of programs -- it’s demanding them. When Taco Bell surveyed its employees about preferred benefits, education came in second, after the more immediate need of transportation to the job. “It’s a huge request from the employee population,” Erland says.
Across industries, low-wage workers are the ones who may most crave further education, thwarted not by academic limitations but by the cost. Almost as many low-income high school sophomores aspire to college as their higher-income counterparts, according to one federal study that tracked them. But 13 years later, just a quarter as many -- barely one in seven -- had earned bachelor’s degrees. Employer-supported programs may hold the power to shift those figures.
Sal Napoli, a McDonald’s franchisee who runs 61 restaurants in New York, New Hampshire, Maine, and Vermont, has seen a payoff since the Golden Arches started offering its annual education benefit. “Repeaters” -- employees who apply for the benefit more than once -- have increased from 25 percent to 41 percent, meaning that Napoli’s team is staying longer in order to take advantage of the perk. One of his employees, an immigrant from Liberia, is splitting her time between McDonald’s and working toward a degree in psychology, thanks to $6,000 granted by the company.
For Napoli, himself the son of an immigrant who found opportunity at McDonald’s, the program is not only good for business but also a source of pride. “When I think about the brand, I think about how we’ve been such an easy target” over everything from employee wages to the quality of the food, he says. “But I’m really proud of our brand and the opportunities we offer, and this gives me another reason why.”
In franchising, even the longest-established education-benefit programs are just a few years old. And the companies working to implement them have quickly realized that they’ve got a lot to learn, too.
When McDonald’s launched its program in 2015, for example, it required that employees work 20 hours a week for 12 months before becoming eligible for $700 of education reimbursement per calendar year. In 2018, the time requirement was dropped to 15 hours a week for 90 days and the reimbursement was raised to $2,500.
“For somebody who’s 18 or 19 years old, 12 months is an eternity,” says Lisa Schumacher, director of education strategies for McDonald’s. “So it didn’t really have the punch we thought we needed.”
Almost all franchises that offer education benefits have hired someone else to manage them, whether they’re designing custom courses or simply choosing scholarship winners. “If higher education is complicated for a student, it’s also hard for companies to understand how the system works,” Schumacher says.
Holt, the Two Maids & a Mop founder, signed on with nonprofit Scholarship America to vet applicants for his grant. Homewatch CareGivers, a healthcare franchise that has invested $1 million in its employees’ education over the past 11 years, teamed up with Relias Learning, which develops customized training. McDonald’s works with CAEL.
“Taco Bell is really good at making tacos,” says Jennifer Bradbury, director of the Taco Bell Foundation, the arm of the company that manages the Live Más scholarships. “We’ve learned a lot in the postsecondary education space in the past few years, but we’re by no means experts. When you combine efforts with a partner, you can create a greater impact.”
That can mean additional layers of support for employee-students. Through CAEL, McDonald’s offers academic and career advice, in English or Spanish, over the phone. “It was really important for me that, in addition to having that tuition benefit, we had help for people to navigate higher education,” Schumacher says -- especially for the many employees who are the first in their families to go to college.
Taco Bell’s Live Más scholarship winners are invited to summer workshops that cover résumé writing and interviewing, and they’re paired with mentors in their communities through LinkedIn. “We know that financial assistance is a critical first step, but we also know they need support beyond a check,” Bradbury says.
These programs aren’t cheap or easy, says Cini, president of CAEL. But they pay off -- even if employees move on after staying for the six years or more it typically takes to get a bachelor’s degree part-time. “An employee for six years is really worth it,” Cini says. “Employers are saving millions and millions in terms of employee churn.”
They’re also creating an intangible amount of goodwill, not to mention a pipeline of management talent that may serve them in the future. Ron Williams, 27, was already borrowing to pay for his tuition at the California State University at Stanislaus when the McDonald’s franchisee he worked for sat him down and told him to apply for its benefit. He received additional support, and after Williams graduated in 2017, he came back to McDonald’s for a job in corporate as an operations associate, working with franchisees.
Today, he never misses a chance to make sure franchisees know about the program -- and how much loyalty it breeds, says Williams. “I felt like someone really did care about my college, my future,” he says. “If they gave me this money, I’m not going to flake on them and not show up to work. I felt like I was a part of their actual business.”
While the early results of these programs in franchising are positive, there are no doubt years of refining and tweaking ahead as companies seek the best results for their business. And just as franchises looked to bigger players for guidance on launching these benefits, they’re now looking for guidance on how to evolve.
Walmart, for example, has continued to expand its offerings. In June, it extended education benefits to employees still in high school and added 14 technology degrees and certificates for which its full- and part-time workforce can receive tuition, books, fees, and academic counseling. The retailer expects the number of employees who take advantage of the benefit to balloon from the current 7,500 to as many as 75,000 over the next five years.
That will put additional pressure on its competitors for labor, including franchisees and franchisors. Carlson says her company, Guild, is anticipating a swift expansion of its portfolio of franchise clients as the industry is increasingly looking to education programs as a way to do well by doing good.
Back in Bloomington, Humphreys-Savell still works at the Taco Bell near her university campus. The support from her employer has accelerated her career timeline and given her greater academic options. Without it, she says, she’d still be slogging her way through community college. As Humphreys-Savell is working toward her degree and making plans to become an art teacher, she knows she has become a lifelong advocate for the fast-food chain.
In fact, now that her younger sister is starting to think about getting a job, Humphreys-Savell has a suggestion: “I’m encouraging her to work at Taco Bell.”