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Minimum wage hikes affect franchises more

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A new Employment policies Institute survey shows hikes in local minimum wages affect franchise businesses more than other small businesses.

In some states, small businesses are granted more time to adapt to the new wage, but franchises are treated as larger corporate entities because they are part of a network.

The survey focused on franchise and non-franchise buisnesses in eight key industries, such as hotels and restaurants that typically have a large share of minimum-wage workers.

The survey found that franchise businesses are more likely to employ minimum wage workers than other businesses, and are more likely to take offsetting steps to manage the increased labor costs.

It showed 65 percent of franchise businesses were likely to reduce staff after a hike in the minimum wage to $15, while only 51 percent of other small businesses were.

It showed 54 percent of franchises were more likely to turn to additional automation, while only 37 percent of small businesses were, and 64 percent of franchises were likely to reduce employees’ hours, compared with only 46 percent of small businesses.

At businesses such as quick service restaurants and hotels, the impacts were greater than at other businesses. More than 80 percent of franchise quick service restaurant owners said they are likely to reduce hiring, compared to 58 percent of non-franchise quick service restaurant owners. Nearly 90 percent of franchise hotel owners said they are likely to raise room rates, compared to 70 percent of non-franchise hotel owners.

In other survey results, 86 percent of franchise business owners who were able to answer the question said they will not be able to renegotiate contracts with their franchisor to absorb the increased labor cost, and nearly 80 percent of the same said that the royalty fees they currently pay for advertising, marketing and other services can’t be reduced without having to pay for those costs

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