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How much has The Great Resignation affected franchising?

Insight

How much has The Great Resignation affected franchising?

Businesses over the U.S. are reeling in the face of record employee turnover and struggling to staff locations at times. What is the cause of ‘The Great Resignation’ and to what extent have franchised businesses suffered?

Business owners have had a torrid time these past two years. First, it was the suppression of all business activity due to COVID-19-initiated lockdowns, and now it’s a spate of resignations. It started in April 2021, and the U.S. Bureau of Labor Statistics noted that four million Americans left their jobs in July. 

When reviewing statistics to do with hires, fires and layoffs, they tend to provide a picture of the health of an economy. When people are leaving jobs at record rates, it typically suggests a period of strong economic activity, stability and low unemployment. 

While this was the case for a while, it isn’t anymore. Resignations are still on the rise, despite high levels of unemployment and well-reported labor shortages.  

It has always been normal to use indicators like unemployment, economic activity and stability to predict what people will do as a result. COVID-19 changed this, people’s lives were upended in a way that they have never been before, and as a result, they reconsidered some of their choices in life and the direction they were heading; something no algorithm or economist can measure and foresee. 

Franchises are deeply affected, especially in the QSR sector, where workers have been quitting at record rates. In mid-October, food service worker resignation rates hit 6.8 per cent, above the 20-year industry average of 4.1 per cent and above the record highs of five per cent in 2005 and 2019. 

People clearly want more out of their careers, and franchises are in a position to provide that sense of meaning through franchising itself, as well as providing their workers with better pay and work conditions to prevent employee turnover. 

“The pandemic has impacted every facet of our lives and that includes staffing and labor,” said Dan Harmon, president and COO of Smoothie King

“American workers have had ample time during the pandemic to reassess their working lives and what they want from a job and companies are going to have to adapt and change to meet their new priorities when it comes to employment.” 

What is The Great Resignation and why is it happening? 

As the name suggests, it refers to a spate of unusual resignations since April 2021 that seems to defy conventional wisdom. Resignations were increasing despite certain economic indicators showing that resignations should be decreasing. In August alone, 4.3 million Americans quit their jobs and the quits rate, which is measured against total employment, rose to a series high of 2.9 per cent in the same month, according to the Labor Department’s Job Openings and Labor Turnover Survey. 

“I think The Great Resignation really has come about because of a few factors. The pandemic made people re-evaluate what they’re doing for work, especially when they saw the difference between essential workers versus non-essential, and for those that are non-essential, they saw how quickly they could lose their jobs, even if they thought they were secure,” said Mary Elizabeth Elkordy, the founder and president of Elkordy Global Strategies. 

“Even if it’s for no fault of their own, they could have been at the company for 20 years, but they still would have lost their jobs” 

Many workers around the world suffered during initial lockdowns, with no opportunity to earn and no right to furlough pay. The restaurant industry in the U.S., one of the largest sectors of franchising, is where the ‘The Great Resignation’ can be easily observed. 

“The pendulum has definitely swung in the direction of the team member which has caused us to have to take a hard look at our team member retention strategies” 

This is clearly evidenced by the industry’s high-resignation rate in mid-October. It’s not too dissimilar in other industries too, but instead of being discouraged by low pay, some workers in other industries are quitting their current jobs with the knowledge that there are similar roles with better pay. 

What is behind these mass resignations? 

When businesses such as restaurants did open, it thrust workers into a risky situation, where they were constantly at risk of catching COVID-19 whilst having to manage an increased workload as more and more of their colleagues were quitting. Pay is relatively poor for food service workers; a survey by One Fair Wage showed that 53 per cent of respondents are considering quitting their restaurant jobs and 76 per cent cite low pay and tips as the reason behind it. Many saw no reason to persist with their companies and decided to quit. 

After 41 quarters of same-stores sales increases, Domino’s Pizza finally registered a bad quarter in 2021. Less staff meant reduced operating hours and delivery systems suffering; this all led to Domino’s having a bad quarter. Domino’s response to the problem has been to increase wages and speed up applications at company-owned stores. 

“While our company-wide sales have been fantastic, Smoothie King franchise owners haven’t been immune to the effects of the labor shortage. The pendulum has definitely swung in the direction of the team member which has caused us to have to take a hard look at our team member retention strategies to make sure we are recruiting and retaining quality team members at our locations nationwide,” said Harmon. 

“We have implemented a couple of key strategies that we believe will help ease the effects most restaurants are seeing when it comes to the labor shortage.” 

The pandemic was such a monumental disruption to people’s lives, that they began to reconsider what mattered in life. Many now wanted to pursue more meaningful work that they enjoy as opposed to clocking in nine-to-five to pay the bills.  

With many working from home, priorities shifted. Some disliked the way their employer treated them, and some just saw it as an opportunity to pursue their dream role. Workers who were sick of their company’s culture saw the pandemic as an opportunity to cut ties and search for pastures anew. 

“People have had the benefit of enjoying remote work and some businesses are now requiring people to go back to the office, and they just don’t want to do it anymore. They would rather stay at home with their families,” said Elkordy. 

“The pandemic was such a monumental disruption to people’s lives, that they began to reconsider what mattered in life”

“You have also seen people who have really thrived in the environment of the side hustle, a freelance world where they can dictate their own hours and be able to determine their own financial future, which might be more lucrative, at least in the short term than a normal nine to five job.” 

How are companies combatting it? 

A business can only ever be as strong as its employees. If they’re constantly quitting and inbound job applications are at an all-time low, a business owner is right to worry about their future. 

It’s clear to see there are almost two classes of workers who are a part of The Great Resignation. The first are the food service workers and similarly low-paid jobs. Very few work these jobs out of passion or because it’s what they want to do, they work those jobs for the money.  

During and after the lockdown, food service workers, amongst many, were hailed as ‘frontline workers’, taking on the brunt of the risk to keep people fed. This newfound appreciation did not result in increased wages, and consequently, food service workers appraised themselves more highly and left jobs in which they felt they were not valued. As a result, some chains like Domino’s have increased wages in corporate-owned stores. 

“As restaurant brands across the nation face the ongoing labor shortage, many are focusing on innovative ways to recruit and hire new talent,” said Harmon. 

“People seek employment that comes with growth opportunities. Building a career road map and displaying the different opportunities available to team members within a store or corporate level empowers people to see the bigger picture and a clear path to get there. 

“We train our people to make sure they are leading respectfully and treating people right. Kindness needs to remain at the center of everything we do. Celebrating big and little wins goes a long way in keeping team members motivated and happy in their careers. 

Today’s workforce is reassessing their work/life balance and want to feel like their contributions make a difference to the greater good. Smoothie King’s mission to inspire a healthy and active lifestyle, not to mention our partnership with the Challenged Athletes Foundation, align with these evolving priorities.” 

Smaller chains have been quick to pivot too. &Pizza, an American pizza chain, raised wages at the start of the pandemic and gave certain days, like Election Day, a paid day off. Owner Michael Lastoria even increased wages to $16 an hour and has not only kept all locations open, but opened 11 more during the pandemic. The average fast-food worker earns around $12.43 an hour. In a role where pay is the key consideration, paying more than their competitors will undoubtedly position them strongly when competing for local labor. 

The second class are the more white-collar roles, many of which continued into the lockdowns. Many began to work from home with longer hours, often blurring the line between work and home, contributing to burnout and anxiety. 

Plan ahead and keep your ears on the ground 

It’s essential for business owners to not take employees for granted. It’s of the utmost importance to be in constant communication with them and understand the pain points of their jobs. Whether it’s food service workers or tech developers, the point remains the same.  

By keeping an ear to the ground, business owners can pre-empt resignations and job dissatisfaction, and put in place a process or offer to remedy the situation. Currently, companies are dealing with the issue by offering improved pay and working conditions after workers have already mentally divorced themselves from the role. Pro-active monitoring of employee sentiment can alleviate labor problems, and even boost the reputation of a business, drawing in more qualified applicants. 

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