Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Dynamic Scheduling to Cut Labor Costs
Transcript
- Lucas: So we talk a lot on this show about boosting revenue, but the fastest way to improve a franchise's bottom line is often on the cost side. And the single biggest controllable expense for most franchisees is labor. Luna: Right. In a typical fast-casual restaurant, labor runs somewhere between 28 and 34 percent of sales. Even small inefficiencies there can eat up your entire profit margin. Lucas: Exactly. And historically, scheduling has been pretty blunt. You'd have a store manager looking at last year's sales data, maybe the weather forecast, and writing a paper schedule two weeks out. That approach is getting obsolete. Luna: Because now we have dynamic scheduling — software that uses real-time data to adjust shifts day by day, sometimes even hour by hour. Lucas: Right. And it's not just about cutting hours. It's about matching supply with demand more precisely. I want to look at a specific case — a franchise group that runs about 40 locations of a popular fast-casual brand, mostly in the Midwest. They started using a platform called Legion Workforce last year. Luna: Legion is one of the bigger players in this space. They use machine learning to predict traffic. Lucas: Yeah. And the franchise group gave me some numbers. Within six months, they reduced overtime by 22 percent and their overall labor cost as a percentage of sales dropped by about 1.8 percentage points. That's not trivial. Luna: 1.8 points on 30 percent labor cost is a 6 percent improvement in that line item. On a million-dollar store, that's eighteen thousand dollars per location. Lucas: Exactly. And they did it without cutting service quality. In fact, their same-store sales went up about 4 percent over that period. The theory is that better staffing during peak hours means faster service and fewer missed sales. Luna: So how does the software actually work? Is it just plugging in historical data? Lucas: It's a few layers. The platform ingests point of sale data from the last two years, plus real-time data like current foot traffic, weather conditions, local events — a school basketball game or a concert can dramatically change demand. It also learns from how long orders take and when customers tend to arrive. Luna: And it produces a schedule that adjusts daily. Lucas: Right. The manager gets a recommended schedule and can tweak it. But the system also handles shift swaps and overtime alerts automatically. If an employee wants to pick up a shift, the system knows if it will trigger overtime and flags it. Luna: That's huge. Overtime is expensive. Time and a half adds up fast. Lucas: And it's often avoidable. The other piece is that the system lets employees trade shifts through an app — that reduces the manager's administrative burden and also gives workers more control over their schedules. Luna: Which is important because employee satisfaction matters. If you're constantly changing schedules unpredictably, you can lose staff. Lucas: Yeah, and that's been a criticism of dynamic scheduling in some industries — the 'just-in-time' approach can wreak havoc on workers' lives. You've got to balance efficiency with predictability. Luna: So how do these franchisees navigate that? Because some cities have predictive scheduling laws — like Seattle and New York require advance notice. Lucas: Right, and that's part of the reason the software is actually helpful. The platforms can enforce compliance. They can be set to lock the schedule a certain number of days in advance — say 14 days — and after that, any changes trigger premium pay or can't happen. So the franchisee stays legal and the employees get stability. Luna: So the technology enables both flexibility and protection. Lucas: That's the idea. And the franchise group I mentioned actually saw a 15 percent reduction in turnover over that six-month period. Employees appreciated the ability to swap shifts and also knowing their schedule two weeks out. Luna: It's a rare win-win. Lower costs, higher sales, happier workers. But what's the upfront cost for a franchisee looking at these tools? Lucas: Most of these platforms charge per employee per month. Legion is in the range of three to five dollars per employee per month. For a location with forty staff, that's maybe two hundred dollars a month. For a forty-store group, that's eight thousand a month. But the ROI is almost immediate from overtime savings alone. Luna: That's less than the cost of one overtime shift per week per store. Lucas: Exactly. And the bigger the group, the more leverage you have. Some franchisors are even negotiating enterprise-wide deals and offering the software to franchisees at a discount. Luna: We should note that this isn't a paid promotion. We don't do that. Lucas: No, we don't. And that's actually a good moment to mention — we deliberately don't run ads on these episodes. If you've found value in these conversations and want to support that choice, the link is buy me a coffee dot com slash fexingo. No pressure, just good coffee. Luna: Yeah, it helps us keep the show focused on what matters: real data and real stories for franchisees. Lucas: Alright, back to scheduling. One other angle I found interesting — some franchisees are using dynamic scheduling not just for back of house but for the front of house, like sales associates in retail franchises. Luna: Oh, like in a home services or cleaning franchise, where you have appointment-based work? Lucas: Right, but also in retail stores. I talked to a franchisee who runs three cell phone repair stores. Their foot traffic is very event-driven — a new iPhone launch, a local festival, a power outage. He uses a platform called Jolt to adjust staffing based on real-time traffic counters at the door. Luna: So if traffic is slow, he sends people home early? Lucas: Or doesn't call them in. He has a pool of part-timers who get notified an hour before if they're needed. The system also tracks historical data per day of week and weather. He said his labor cost as a percentage of revenue went from 32 percent to 27 percent in four months. Luna: Five points is huge. But doesn't that create resentment if employees never know if they'll work? Lucas: It can. He mitigates it by guaranteeing a minimum of 15 hours per week for every employee — so there's a floor. And the on-call shifts are voluntary. Employees can opt out of the on-call pool. About 60 percent choose to be in it because they like the flexibility. Luna: So it's a hybrid model. Some predictability, some flexibility. Lucas: Exactly. And the data shows that employees who opt into the on-call system actually have higher satisfaction scores than those who don't, because they feel they have more control. Luna: Let's talk about the franchisor perspective. Some brands mandate that franchisees use specific scheduling systems. Is that common? Lucas: It's becoming more common. The bigger fast-food chains — think McDonald's, Subway — they've had their own labor optimization tools for years. But newer brands are starting to require it in their franchise agreements. The logic is that if a franchisee fails on labor cost, it hurts the brand's profitability and can lead to store closures. Luna: So it's a way to protect the system. Lucas: And also to collect data. If the franchisor can see labor data across the system, they can benchmark and identify best practices. That's powerful. Luna: What about smaller franchisees with just one or two stores? Do these tools still make sense? Lucas: They do. The per-store cost is low enough that even a single unit can see a return. But the implementation challenge is real. The manager has to be willing to learn the system and trust the algorithm. Luna: And not override it with their gut feeling. Lucas: Right. I've seen cases where the system recommends fewer people for a Tuesday lunch, but the manager thinks 'we're always busy on Tuesday' and adds extra staff, and then they're overstaffed. The key is to let the system learn and adjust. Luna: So we're talking about a cultural shift for a lot of franchisees. Lucas: It is. But the data is compelling. The franchise group I mentioned earlier — they're now rolling out dynamic scheduling to all 40 stores, and they're expecting a full-year labor savings of about $700,000 across the system. Luna: That's real money. And it's not just cutting hours — it's smart allocation. Lucas: Exactly. And as the technology gets cheaper and easier, I think we'll see this become standard practice in franchising within five years. Luna: It makes you wonder what other cost lines will get the same treatment. Inventory management is another big one. Lucas: We should do an episode on that. But for now, the takeaway is: if you're a franchisee and you haven't looked at dynamic scheduling, you're probably leaving money on the table. Luna: Agreed. And if you want to dig deeper, we'll put some resources in the show notes. Lucas: Good. Until next time.