How You Can Lower the Cost of Operating a Franchise

One of the most common questions we hear is, “What are the costs associated with operating a franchise?” As with any business, there are a number of expenses associated with owning a franchise with hiring costs being one of them. Below you will find the top costs associated with operating a franchise and 6 tips on ways to lower the cost of operating a franchise.

How to Lower Costs of Operating a Franchise Business

When owning a franchise business, entrepreneurs face unique challenges that need to be addressed in order to achieve and sustain success. As with any business, there are a number of costs associated with operating a franchise with hiring costs being one of them. Below you will find the top costs associated with operating a franchise and 6 tips on ways to lower the cost of operating a franchise.

The Top Costs Associated with Running a Franchise

The top costs of managing a franchise frequently include franchise fees, royalty fees, advertising fees, training fees, supplies and equipment costs, labor costs, rent or lease costs, insurance costs, and ongoing operational costs.

Franchise/Royalty Fees:

Franchise fees are the fees that are charged by a corporation to use the name and operating system of their business. While the franchise fee is a one-time payment it can also be an ongoing royalty that is paid to the franchisor for the right to use their branding, products/services, and business model. The amount of the fee varies depending on the franchise but can range from a few thousand to hundreds of thousands of dollars.

Franchise Operating Costs:

The operating costs for any business are the cost of owning said business. These costs can vary greatly depending on the specific franchise and location. Some common operating costs include rent/lease payments, equipment and supply expenses, employee salaries and benefits, marketing and advertising expenses, franchise fees, and insurance costs. It is important to carefully analyze and budget for these expenses before investing in a franchise.

Franchise Hiring Costs:

Hiring and training employees in a franchise can be difficult, time-consuming, and expensive. There are high turnover rates in franchise businesses due to the nature of the industry and its workforce, which includes many entry-level, part-time, or temporary positions.

Franchise Hiring and Retention Challenges

Hiring and retaining employees in a franchise business can be challenging for a number of reasons beginning with attracting quality candidates. Due to the lack of advancement opportunities and low wages, there is also a high turnover rate as well. Below you will find more information on hiring and retention challenges franchise owners frequently face.

Attracting quality candidates

Due to the perception that franchise jobs offer lower pay and lack of job security, it is challenging to find candidates with relevant skills and experience for the positions.

High turnover rates

There is a high turnover rate in the franchise industry due to the nature of the business. The wages can be low, there is a  lack of job security, limited opportunity for career advancement, poor working conditions, longer working hours, and inadequate training and support for the employees.

Consistency in hiring standards

Since the franchises are primarily owned by different people there is a lack of consistency in hiring employees. Franchisees have control over their own hiring processes and may not follow the same procedures as other franchises or the parent company. Additionally, there may not be differences in the training or qualifications required for franchise employees.

6 Tips to Reduce Costs for Franchise Operations:

1. Implement Energy-Efficient Practices:

This can be done by implementing energy-efficient appliances, using LED lighting, implementing smart thermostats, and training staff on energy-saving best practices.

2. Utilize AI for Hiring and Repetitive Tasks:

AI can be used for a number of repetitive tasks including employee scheduling, payroll, and invoicing. It can also help with the hiring process and help with hiring qualified people for the positions. This will help to increase employee efficiency.

3. Optimize Labor Management:

Evaluate staffing needs to ensure resources are effectively allocated and minimize overtime expenses by adjusting work schedules and providing employee cross-training opportunities.

4. Review Lease Agreements and Location Costs:

Routinely review lease agreements for potential savings and consider renegotiating terms.

5. Promote Loyalty Programs and Incentives:

Encourage repeat business through loyalty programs that reward customers for their continued business. This helps to reduce marketing costs by targeting your existing customers.

6. Provide Training Programs for Employees:

By training new hires it helps to improve their skills and knowledge, improving the productivity of the business. Employees who have been trained can receive further training to advance their careers. This will help to reduce turnover and increase employee satisfaction and retention.

Utilizing AI Recruitment Tools for Improved Hiring

One way to reduce the cost of hiring employees is to utilize AI recruitment tools. AI  recruitment tools can help with hiring in the following ways:

• It can automate the application process – AI recruitment tools can assist with screening resumes by using machine learning algorithms to identify the most qualified candidates.

• Scheduling interviews – by automating the process, AI can conduct initial screenings and schedule interviews
  
• Create inclusive job postings – AI can help to develop non-biased job postings making the jobs more inclusive

Operating a franchise business presents a number of unique challenges and costs, including franchise and royalty fees, operating costs, and employee expenses. There are a number of ways to lower these costs including utilizing AI for hiring, optimizing labor management, promoting loyalty programs and incentives, and many more additional ways. By addressing these challenges with effective strategies, the costs can be reduced, and running a successful franchise will be easier.

PandoLogic can help your franchise business as it is the leading programmatic job advertising and vendor management platform used in job recruiting. Through the use of artificial intelligence (AI), and proprietary cognitive engines, they enable companies to source quality applicants more effectively and efficiently. Job advertising is optimized and fully automated with their talent acquisition platform utilized across diverse job categories. A demo is available to show you how easy it is to use.