Franchise Lawyer Blog

The Cost of Raising Minimum Wage

In the last several weeks, the issue of increasing the minimum wage (the federal mandate is for $7.25) has been the subject of much discussion in the press and within municipal governments.  There are proposals pending to increase the minimum to as much as $15 an hour, more than twice the rate that the federal government requires and substantially higher than states where minimums are already higher than the federal rate.  At least one municipality, the city of SeaTac, near Seattle, Washington, has already passed a voter ballot measure raising the rate to $15 an hour for hospitality and transportation industry workers.  Other jurisdictions are considering similar measures.

While some are debating the societal benefits of an increased minimum wage (not the subject of this blog), many in the franchise industry are bemoaning the potential economic impact to their businesses of such a dramatic increase in minimum wage.  The industry, dominated by fast food and quick service restaurants, maintains a large workforce of minimum waged workers and increasing (in some cases doubling) the minimum wage by the amounts discussed would result in reductions in entry level job hiring and have a huge impact on the bottom line.  In addition, the prices at fast food and quick service restaurants may also rise.  Steve Caldeira, the President of the International Franchise Association, has estimated, according to several published reports, that an increase to $15 an hour would mean a 25% to 50% increase in the price of fast foods.

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