Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Turn Employee Turnover into a Training Edge
Transcript
- Lucas: So there's a number that keeps coming up in franchise operations this quarter, and it's not revenue or margins. It's your turnover rate. Specifically, the turnover rate for your entry-level staff. And I think most franchisees look at that number and just sigh, because they assume it's a cost they can't control. But there's a way to flip it into an actual advantage. Luna: An advantage? I mean, turnover feels like the definition of a problem. How do you spin that into a positive? Lucas: Well, let's start with a specific example. I was talking to the owner of a regional fast-casual chain, about forty locations across the Southeast. Their kitchen staff turnover was running around a hundred and ten percent annually. That means they were replacing basically every single kitchen employee every year. And they decided to treat it not as an HR nuisance but as a data problem. Luna: Okay, so what did they actually do? Did they just raise wages? Lucas: No, wages were already competitive for the market. What they did was overhaul the first ninety days. They realized most of their exits happened in weeks three through six. So they built a structured onboarding checklist, with specific training milestones for each shift. And they added a 'stay interview' at the thirty-day and ninety-day marks, where a manager sits down and asks, 'What's working, what's not, what would make you stay?' Luna: A stay interview instead of an exit interview. That's a nice flip. And did it move the needle? Lucas: Within nine months, their turnover dropped to about seventy-five percent. Still high, but a significant improvement. More importantly, the cost per hire dropped because they were spending less on re-recruiting and retraining. They calculated that each avoided turnover saved about three thousand dollars in recruiting fees, training hours, and lost productivity. So that thirty-point drop was worth over a hundred thousand dollars a year for their top ten stores. Luna: That's a real number. So the key was not just trying to retain everyone, but figuring out why people were leaving early and fixing that specific window. Lucas: Exactly. And that's the angle I want to drill into today. Because the common assumption is that turnover is just a fact of life in franchising. But if you look at where it's happening, and you treat it as feedback, it can actually make your operation stronger. It forces you to tighten your training, sharpen your scheduling, and even rethink who you hire in the first place. Luna: So you're saying some turnover might even be healthy? I mean, if you're hiring the wrong type of person, you want them to leave, right? Lucas: Right. There's a concept called functional turnover. That's when the people who leave are the ones you'd have wanted to fire anyway. If your turnover is concentrated among low performers, that's actually a sign your manager is making good calls. But most franchisees don't segment their turnover data. They just see one big scary number. Luna: How do you segment it? I mean, what should a franchisee actually look at on a spreadsheet? Lucas: You break it down by tenure, by shift, by job role. So, for example, are your morning prep cooks leaving after two weeks, while your evening line cooks stay for a year? That tells you something about your morning manager or your prep training. Also, exit interviews are valuable, but not the way most people do them. Most exit interviews happen on the last day, and the employee just wants to get out. You learn way more from a stay interview at week three, when they still care. Luna: So you're saying the thirty-day mark is the critical window. And that's also when most people decide whether they're going to stay or not. That makes sense. I remember my first job, I think I decided by day two whether I'd last a month. Lucas: Exactly. And the data backs it up. The Society for Human Resource Management, SHRM, has found that the cost of replacing an hourly worker can be up to fifty percent of their annual salary. For a fast-food or quick-service franchise, that's often around two thousand to three thousand dollars. So if you can reduce turnover by even ten points, that's a direct hit to your bottom line. Luna: This feels very actionable. But what about franchisees who don't have a dedicated HR person? They're running the store themselves. How do they implement this without a big corporate team? Lucas: That's the beauty of it. You don't need an HR department. You need a checklist and a commitment to do one interview at day thirty. The checklist can be as simple as a one-page sheet. Day one, you show them the walk-in cooler and how to use the time clock. Day three, you have them shadow a veteran. Day seven, they make a burger on their own with supervision. That structure alone reduces anxiety and makes people feel like they're making progress. Luna: And the stay interview, what are the three questions you'd ask? Lucas: I'd ask, 'What's been the best part of the job so far?' 'What's been the most frustrating part?' And, 'What would make you consider staying here for a year?' The last one is key, because it gets at their future intentions. You can then act on those answers. If people say they want more hours, you adjust. If they say the manager yells, you coach the manager. It's feedback you can actually use. Luna: I love that. It's like listening to your employees as if they were customers. Speaking of customers, did the chain in your example see any impact on customer satisfaction? Lucas: They did, actually. Their mystery shopper scores improved by about seven points on a hundred-point scale. Why? Because when you have more experienced staff, they're faster and more consistent. And that consistency is huge in a franchise. Customers expect the same experience at every location. If you're constantly training new people, the experience is erratic. Luna: So the turnover problem was really a consistency problem in disguise. And fixing the turnover helped fix the product. Lucas: Yeah. And I think that's the lens that makes this interesting. It's not just about saving money on recruiting. It's about building a more reliable operation, which is the core promise of a franchise. Luna: This is exactly the kind of conversation that makes me want to go back and look at our own numbers. And I know our listeners are the same. This is the kind of insight that if it moves the needle for them, it's worth a small thank-you. If today's episode gave you one idea you can use, you can show your appreciation at buy me a coffee dot com slash fexingo. Every little bit helps keep this podcast ad-free. Lucas: Yeah, honestly, that's the thing. We love bringing you these conversations, and listener support is what makes it possible. Same link, buy me a coffee dot com slash fexingo. No pressure, just if you find value here. Luna: Okay, back to the numbers. So we've talked about the thirty-day interview and the checklist. What about the exit interview? You said most are done wrong. How should a franchisee actually do one when someone does leave? Lucas: If you insist on an exit interview, do it a month after they leave. You'd be surprised how many people are willing to talk candidly once they're gone and have landed somewhere. But the better move is to use the turnover data to spot patterns. If you have a specific manager whose team always leaves, that's a red flag. If your weekend shifts have high turnover, maybe the schedule is the problem. Luna: So it's not just about the individual employee, it's about the system around them. Lucas: Exactly. And that's where franchisees have an advantage. Because you have a network of other franchisees in the same system. You can share best practices. If one location has low turnover, find out what they're doing differently. Is it the manager? Is it the schedule? Is it the way they run training? You can copy that. Luna: That's a good point. The franchisor might even have data across the whole system. Have you seen any franchise brands actually using turnover data to improve their model? Lucas: I have. I know of a larger QSR brand that started tracking turnover by store and by manager, and they found that stores with a certain type of scheduling software had significantly lower turnover. They then pushed that software to the whole network. So if you're a franchisee, you can go to your franchisor and say, 'Hey, I've cut my turnover by a third using this approach. Can we talk about rolling it out?' That's a great way to build credibility and get more support. Luna: That's a smart move. It turns your operational win into a relationship asset with the home office. And I imagine that helps when you're negotiating for other things later. Lucas: Absolutely. It shows you're running a tight ship and that you're invested in the brand. Now, one thing I want to be careful about: I'm not saying you should try to get turnover to zero. That's both unrealistic and actually undesirable. You want to keep your best people, but you also want to let go of the ones who aren't a fit. So the goal is to reduce the turnover that hurts, not all turnover. Luna: How do you distinguish between the two? Is there a rule of thumb? Lucas: You can look at tenure and performance. If someone leaves after a year and was a rock star, that's a loss. If someone leaves after three months and was constantly late, that's actually a win. You want to track who leaves, why they leave, and how long they stayed. Then you'll see patterns. For example, if your best employees tend to leave after eighteen months, maybe there's a growth path missing. If your worst leave after two weeks, that's not a problem. Luna: So it's about the quality of the turnover, not just the quantity. That's a much more nuanced view than most owners have. Lucas: Right. And that's the actionable takeaway for today. Start tracking your turnover by tenure and performance. Do one stay interview at day thirty. And use that data to fix one thing this quarter. Maybe it's your onboarding, maybe it's your scheduling, maybe it's how you recognize good work. Small changes can have a big impact. Luna: And if you're a franchisee who's already doing something smart with turnover, I'd love to hear about it. We're always looking for stories to share. You can reach us through the show notes. Lucas: That's a great idea. And who knows, maybe we'll do a follow-up episode with listener examples. That's it for today. We'll be back on Wednesday with another deep dive into franchise operations.