Maximize profits by doing this with your staff

All franchise owners must manage factors that they cannot fully control, such as the economy, rent, franchisee fees, and the weather. One thing you can control is how you reward your team. More importantly, you need to align your financial goals with your team’s compensation. You may want to pay the bare minimum, but many people misunderstand this part of wealth creation.

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overpayment your employees

Why do you overpay your employees? The main reason for owning a franchise company is to get rich while others do most of the work. The real key to becoming wealthy through franchise ownership is to start a company, not just buy a job. He opens one or two locations, reinvests the profits from them into more businesses, and with further reinvestment he builds a company with 10-20 locations and earns semi-passive income. We will provide you with the corresponding amount. Rather than cooking meals in a restaurant or cleaning salon floors, you provide training, marketing, real estate, and other services to managers who hire and supervise employees.

A great example is Rick Fisher, an IT sales executive who sought passive income and wealth through franchising. With no restaurant experience, he invested in the early days of Five His Guys His Burgers & Fries and grew it to his 10 stores while continuing to work his day job. He then left to focus on his franchising business full-time. Currently, he owns more than 20 of his Five Guys and Popeye’s locations, without any restaurant shifts.

You need to attract, retain and grow top talent, and align their compensation with your goals.

To do this, you need to attract, retain and grow top talent, and align their compensation with your company’s goals. That means paying them well, which means overpaying them. That way, they will stay, be satisfied, develop their own expertise, take better care of their customers, and increase the profitability of your store or restaurant.

Paying minimum wage won’t do that. The amazing thing is that you can make more money by doing so. For example, salon franchise GLO30 pays its staff 10 percent to 20 percent of their prevailing wage, offers full benefits, and even offers a 401(K) to all employees, but still makes 40 percent of their profits. rate and maintain an ROI of nearly 100 percent. Even after paying too much.

Related: This company promises to transform drive-thrus with AI, but what’s the secret behind the technology? Humans.

minimize turnover

People stay in jobs where they are valued, and pay is a big part of that. Paying the bare minimum guarantees a high turnover, which quickly erodes profits. You don’t even know or even think about a disgruntled employee leaving until they take another job. By then it will be too late. It doesn’t make sense to pay 10 percent more to let a good employee leave when it costs your business ten times more.

Losing employees costs you money in many ways, including the time it takes to find, hire, and train new employees. Managers have to pick up slack while hiring, creating a brain drain. They also know that labor problems will continue, as new employees will eventually leave for more lucrative pastures.

It doesn’t make sense to pay 10 percent more to let a good employee leave when it costs your business ten times more.

Next, consider what I call the “silent cost of sales”: poor customer experience. Imagine one or two of your girlfriends sitting out while customers are waiting in line out the door during a restaurant’s busy peak meal time. Maybe not very patient. What kind of guest experience is that? How will they review your business or recommend it to a friend? Even if they don’t complain, they probably won’t come back. If you lose employees, you’ll lose customers, even if you return to full staff.

In other words, turnover results in unhappy customers, employees, and management, and the business does not grow. If you make an acquisition to grow your business and have high turnover, you won’t be able to achieve the goals you set for yourself and your business.

Now consider the highly paid employees who continue to work. A well-trained, engaged, and happy team of employees is in place, and in some cases even slightly overstaffed. What will the guest experience be like? What are the reviews like? How likely are those customers to come back and refer a friend? How much are your sales and profits up? How happy are you as a manager who runs a very successful business that you don’t have to micromanage?

Related: Start your own business or buy a franchise: Which is right for you?

costco

Outside of franchising, Costco has long been known in the U.S. for paying its in-store employees well. According to Ascent, a Motley Fool service, a typical Costco employee in the U.S. earns nearly $26 an hour, more than three times the federally mandated wage of $7.25 an hour, and includes a comprehensive health plan, overtime pay, and paid wages. He is eligible for vacation time and a 401(k). ) Donations and employee stock purchase plans. The average employee may not be wealthy, but they can pay their bills, have opportunities for advancement, and can afford to shop at the store they work at (during special employee-only hours). .

As a result, Costco’s employees are highly motivated and among the most productive in the industry, with per-person revenue three times higher than rivals Walmart and Target, according to Investopedia. According to McKinsey, the average turnover rate in the retail industry is around 60%, but the annual turnover rate after the first year of employment is only 6%.

When starting a new company, overpaying is the only way to go. That creates loyalty.

When you have a good, happy, and well-paid team, your business will be healthier, your profits will increase, your business will run itself, and your profits will double. It also gives you a stronger exit strategy when selling your business. Buyers will pay more for a strong team that can continue to build the business and less for a shaky team.

When starting a new company, overpaying is the only way forward. This creates loyalty, which is rewarded as your employees and your business continue to succeed and grow. It’s also a great way to evaluate whether a particular franchise concept is right for you. Will the franchise allow him to maintain his high ROI while overpaying his staff? If not, think twice.

For more than 20 years, Dan Lowe has grown FranceMart’s emerging franchise brands, such as Five Guys and The Halal Guys, into international sensations through franchising. Fransmart’s current franchise brand portfolio includes fast-growing concepts such as PayMore Electronics, GLO30 Skincare, Fabio Viviani’s JARS Sweets and Things, Jon Taffer’s Taffer’s Tavern, Cilantro Taco Grill, and The Halal Guys.