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Minimum wage issue pits franchisees against cities

Published on NewsOK Modified: June 25, 2014 at 1:23 pm •  Published: June 25, 2014
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Stempler, who has 69 employees at two Seattle franchises, says he'll have to cut jobs to afford the higher wage. The law will increase his payroll costs between $68,000 and $100,000 a year. His competitors will find it easier to adapt because of how officials have structured the law, he says.

"They are discriminating against a class of independent businesses, legally recognized by the federal government and the state," says Stempler.

In Chicago, restaurant franchisees are included under the proposed minimum wage law although other businesses with revenue under $50 million would be exempt. Franchisees would have to raise employees' wages from the current minimum of $8.25 to $15 within two years.

At the restaurant chain Firehouse Subs, the Chicago proposal could lead to customers paying more and getting less service because staffs will be smaller, says Steve Szalinski, a franchisee who also helps new owners get started.

"You could see 10 to 20 percent increases in price," Szalinski says. "Levels of service plausibly won't be as good. It would be an enormous challenge."

The laws could end up costing cities some franchises, says franchising consultant Charlie Magee. Several of his clients decided not to buy franchises in Seattle, and instead are looking in the suburbs or Bellingham, 90 miles north of Seattle, even Oregon, says Magee, who works for the consulting company FranNet.

Some franchisors are also wary about Seattle. The shorter phase-in period is just part of the problem, says Jerrod Sessler, CEO of HomeTask, which has six franchise brands including lawn, handyman and pet grooming services. He won't encourage prospective buyers to seek Seattle locations.

"If you have a city that is willing to pass this sort of legislation, it erodes a trust that they're going to make decisions to help businesses grow and prosper," he says.

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Online:

IFA, www.franchise.org

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Follow Joyce Rosenberg at www.twitter.com/JoyceMRosenberg