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Minimum wage increases are bad business for franchises
Biden increasing minimum wage would ‘make the situation much worse’ for small businesses: Puzder
Former CKE Restaurants CEO Andy Puzder argues it ‘makes absolutely no sense’ for the Biden administration to raise the federal minimum wage as businesses are suffering amid the coronavirus pandemic.
Democrats reintroduced the Raise the Wage Act Tuesday, which would increase the U.S. minimum wage from $7.29 to $15. For franchise owners, this increase could be catastrophic.
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Michael Wagner, President of Pool Scouts, a swimming pool maintenance company, tells FOX Business, costs for their franchises will skyrocket.
“Pool Scouts is the premium brand in the swimming pool cleaning and maintenance business, with 65 territories awarded to 26 franchisees,” Wagner said. “Our biggest costs are labor and chemicals. While chemical cost increases are passed directly on to customers, the labor cost increase will require our franchise owners to raise their prices for our most common services: weekly and biweekly cleanings.”
He added that it will also hurt recruiting efforts.
“We pay above-average wages across the system with starting wages usually around $12.50+ for new technicians and then raise wages as the technicians get more experienced,” Wagner explained. “If we start at $15 we will have less room to increase wages and will also be competing with everyone else at that rate. While cleaning pools is not a bad way to earn money, I fear that wages will be even higher as businesses compete for workers.”
Dan Henninger, the editorial page deputy editor for the Wall Street Journal, describes the $15 level as a “show-stopper" and warns of even more severe consequences.
“The economics don’t work,” Henninger said, “and it puts them out of business.”
The minimum wage has been at current levels since 2009, but Biden, incoming Senate Budget Committee Chairman Bernie Sanders (I-Vt.) and other Democrats introduced legislation raising the federal minimum wage to $15 by 2025. They plan to reach that level in five steps over the next four years, and by 2026 the federal minimum wage would be indexed to median wage growth.
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