How Franchise Owners Can Balance Benefits and Budget with a New Health Insurance Model

In popular franchise industries like hospitality, dining, and retail, business owners struggle with high employee turnover. Even the most successful restaurant and hotel franchises struggle to recruit staff and retain them long-term, and many entry-level franchise roles appeal to students and young people who are quick to bounce from one opportunity to another.

High turnover is expensive for business owners in any sector. According to a 2024 Express Employment Professionals-Harris Poll survey, the average annual turnover cost stands at $36,295, although one in five businesses report costs exceeding $100,000. To stay financially afloat, franchisees must do everything they can to retain talent.

Offering an attractive benefits package is one way for employers to reduce turnover, but group healthcare plans are often too expensive for franchisees running on tight profit margins. With business owners facing franchise fees, mandatory marketing expenses, and pricey supplier agreements, it can be difficult to swallow the high costs of a group insurance plan. To make matters worse, a one-size-fits-all group plan often falls short for franchise owners that employ across age groups, experience levels, and locations.

In response to these challenges, many franchise owners are taking a new approach to healthcare. The individual coverage HRA (ICHRA) provides an affordable route to quality benefits. Employees choose and buy their own insurance, either on healthcare.gov or a state-based exchange, using an allowance set by their employer. ICHRA gives employers control over their healthcare budget while also giving employees the freedom to choose a plan that meets their needs.

Affordable benefits from entry-level to executive

Young people want to work for employers that offer benefits. A survey conducted by Georgetown University shows health insurance is one of the most important factors when considering whether to change jobs. However, for young workers on limited incomes, employer-sponsored healthcare must also be affordable.

Under a traditional group plan, employees in entry-level positions are offered the same benefits as chief executives, despite the differences in income. An employee earning minimum wage is unlikely to have the same healthcare needs or budget as a C-level executive. Many lower-income employees are forced to choose between enrolling in a plan that exceeds their budget or going without coverage altogether.

As a result, enrollment in group health plans is often low among franchise employees. This low participation, especially when combined with high usage, sends costs soaring. Franchisees are commonly hit with double-digit renewal quotes. Employers unable to absorb the increase are left with no choice but to pass it on to the employees. As a result, rates continue to climb year-on-year as more employees are priced out of the plan.

With ICHRA, franchise owners can break the connection between participation and renewal rates. There are no participation requirements, and costs remain stable even if uptake is low. Employers have total control over their healthcare spend, they set a per-employee allowance and decide whether to increase or decrease that amount each year.

Employee choice across state lines

Multi-location franchise owners face an additional challenge when selecting group health insurance. Network limitations and state-specific regulations mean a group plan that makes sense in New York might be of no use to employees based next door in Pennsylvania.

Kampgrounds Enterprises, Inc (KEI) owns seven KOA properties throughout southern California, northern Arizona, and the Midwest. With employees distributed across several states, finding a group plan that served everyone proved impossible. Staff located outside of California, particularly in remote areas of Arizona or Missouri, might have to travel hours to reach a doctor covered by the plan.

KEI switched to ICHRA to ensure every employee got equal access to healthcare. Unlike group plans, ICHRA allows employees to choose insurance based on location and the doctors, specialists, and hospitals available in their area. With individual coverage, KEI employees have been able to get the medical checks they’d put off for years. Rather than driving to the next city, employees in remote locations can get the support they need locally, just like their California-based colleagues.

Hands-off HR administration

Franchisees operate as individual businesses, often with minimal input from the parent company. For new franchisees, or franchisees new to benefits, administering employee healthcare reimbursements can seem overwhelming. ICHRA helps reduce how long businesses spend managing benefits. By shifting ownership of each policy to the employees, the HR team is no longer responsible for negotiating rates or resolving individual issues.

Franchise owners in every sector are achieving budget stability with ICHRA — no more participation requirements, no more double-digit renewals. With ICHRA, employees at every level of the organization, and in every location, can access quality coverage. Staff are healthier, happier, and less likely to look for employment elsewhere.

Jack Hooper is CEO and co-founder of Take Command.