Young Nic Cage - Ridgmont - © via Pintrest

Ontario Min. Wage Hike Threatens Fanchisees

I did it. I actually wrote a Letter to the Editor of my town’s leading newspaper this morning. I was tired of hearing from boutique business owners in the trendy parts of town talking down their less affluent, less independent fellow business people for complaining that the a rise to $15 per hour might ruin them…

Fast Food Wage Protest - © 2013 Sonia FaruqiAngry Fast Food workers have been protesting low wages for at least
the last 5 years, all over the world…

I want to share with you, some of the thoughts I shared with them…

According to the Canadian Franchise Association, more than 1.5 million Canadians are employed by franchise businesses. And almost 45 per cent of retail sales in the country are generated through franchises. That’s big business distributed over many, many small outlets.

Boutique and owner/operated business do not have to operate under the strictures that franchise operators must endure.

Franchisees must pay to license the name and systems of the corporation that owns the franchising operation. They must (usually) pay a percentage of their profits to the corporation, as well. And the Corporation usually insists that they buy their supplies through or from the head office, paying a markup on these goods and services which the head office pockets. In some cases, the head office even sets the franchisees’ retail prices.

Sounds like a losing proposition for franchisees… But, if they follow the head office’s business plan and do everything by the rule book, they will make a profit and their franchises will retain their value as investments.

Then the minimum  wage bumps up…

Franchise business plans are built taking into account market conditions, not the least of which is the prevailing labour cost. If that cost suddenly goes up by three or four dollars an hour, that throws a monkey wrench into the plan. If the franchise company head office won’t let its franchise owners raise prices or make others changes to their business plan to compensate, franchisees lose out on profits, And without sufficient profits, their incomes and the value of their franchise investments take a serious hit.

Eventually, the impact is passed up the ladder to the franchise company head office and something will be done. But, as Tim Horton’s franchisees are finding, the head office is, more often than not, in the ‘profit extraction’ business and really doesn’t give a hoot about the little people. Much less us, their customers.

It’s a dangerous trend and the franchise operators are caught in the middle.

~ Maggie J.