Will Franchises Suffer from a Proposed Higher Minimum Wage?

franchiseMany workers across the nation are protesting, and some states and the federal government appear to be listening.

During his January 2015 speech, President Obama mentioned wanting to see a small hike in the current federal minimum wage per hour (the wage varies in states).

In Seattle, the mayor announced a plan to incrementally increase the minimum wage in his city over a span of between three years and seven years to up to $15 per hour.

It seems inevitable that minimum wage employees will be able to look forward to higher wages in the near future.

What Do Industry Leaders Say About It?

On the flip side, however, some organization leaders, like Steve Caldeira of the International Franchise Association (IFA), are claiming that minimum wage increases like these would devastate the franchise business.

He claims that it would lead to higher prices up to 50% more, lost jobs, and less foot traffic. It’s hard to imagine that paying lower level employees more would do anything of the sort, leading to negative repercussions for businesses and franchise owners.

As the following article asks, does a higher minimum wage hurt franchising?

Is Seattle leading the charge?

First of all, Seattle’s decision to implement a scale of higher minimum wages isn’t federally-mandated, so their goal of reaching $15 per hour isn’t one that lower income cities would have to follow.

Seattle is one of the wealthier areas around the country, with higher incomes to match. It costs more to live there; the economy is thriving there, so it seems reasonable that employers should pay more for their labor. Meantime, less affluent areas like Alabama or Mississippi won’t be forced to match that $15 mark.

President Obama talked about a 10-cent hike, which will actually do little to impact payroll and payroll taxes for franchises, and will do even less to alleviate poverty among the minimum wage working class.

Ten Cents is a Drop in the Bucket

A 10-cent wage hike forced on franchise owners by the federal government wouldn’t likely be a burden at all for many of them.

In fact, franchise owners who are able to offer a little more than the minimum may oftentimes find it easier to attract employees who are eager to prove themselves worthy of being highly valued. This in turn could prove beneficial to sales in two ways.

Better Wages Mean a Better Working Environment and Higher Profits

First, happier employees always give better service. An employee who feels that they are earning a fair living wage will be one who serves happily. It’s also one who will go the extra mile to show that he is capable of more in the way of promotion.

Second, franchise owners who pay a little more will get a well-deserved good reputation from the public. In these days of transparency and social media, a business that treats their employees well will soon be called out.

Consumers who make it a point to shop deliberately will flock to their doors, offsetting any extra cost a franchise owner might incur for increasing their minimum wage.

Who Should Influence Your Decision?

Finally, as a business owner, you should be listening to your consumers and your employees, not wealthy CEOs, lobbyists or special interest groups.

Your daily bread depends on meeting the needs of your customers by meeting the needs of your workers. The rest you can tune out.

With that said, what do you as a business owner think a fair federal minimum wage is for employees?

About the Author: Kate Supino writes extensively about best business practices.