Rising Wages Squeezing Franchise Profits
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Rising Wages Squeezing Franchise Profits

Anyone who owns a franchise knows that keeping labor costs low is a critical element of a business strategy. The less you are forced to pay your staff, the more you’ll have left for reinvestment to grow the business or to take profit. One of the many labor issues that franchisees deal with every day is the minimum wage. Recently there has been a movement afoot to increase the minimum wage to a “liveable wage” that is estimated to be $15 per hour.

Labor issues and the local laws that you need to follow requires that you hire an experienced and knowledgeable franchise attorney. Franchise attorney Mario L. Herman has guided hundreds of franchisors and franchisees to comply with local laws both in the United States and abroad. Call Mario Herman to assist you with setting up your books to make sure that you are paying your employees properly and legally, but not a penny more than you need to.

Franchisees cite the increasing demand for reliable minimum wage workers as putting upward pressure on wages and many feel that the country is at full employment now that so many from Central America have been deported or have decided to leave the country voluntarily. Restaurants in Minnesota are paying workers $13 per hour, well above the $9 per hour minimum in the state. At the rate low workers’ wages are rising, the “Fight for $15” movement is, to cash-strapped franchise employers, a pretty good deal. Bakery/cafe chain Panera Bread cited rising labor costs for the 25 cents per share decline in earnings in the most recent quarter despite a 5% increase in sales during the first three months of 2017, and 11% sales growth year over year. Buffalo Wild Wings Inc., earnings fell 17 cents per share in the face of rising sales.

Most low-wage employees don’t care if your business fails, they just want their money, and they want it now. If your company goes bankrupt the now unemployed minimum wage worker can simply find another minimum wage job. Before bankruptcy, however, laying off employees is another strategy that a franchisee should consider.