{{title}}
{{byline}}
{{byline}}
One of the most pressing challenges facing restaurant owners today is the rising minimum wage. States such as California and New York, along with Washington, D.C., and several states in the Northeast and Pacific Northwest, have some of the highest minimum wage rates in the country. While these increases provide welcome financial benefits for workers, they also place additional pressure on restaurant operators already grappling with rising food costs, shrinking profit margins, and other operational expenses.
Franchise Update asked several multi-unit restaurant franchisees how rising minimum wages are affecting their businesses. Their responses varied depending on the minimum wage requirements in the states where they operate, as well as the number of locations they own in those markets.
Much like tariffs that increase the cost of goods, rising labor expenses force restaurant owners to consider passing those additional costs along to customers through higher menu prices. However, raising prices comes with risks, including reduced customer spending, smaller average tickets, and the possibility of driving away price-sensitive consumers altogether.
The challenge of rising wages is further complicated by the delicate balance of managing restaurant labor. Owners must remain competitive in attracting, rewarding, and retaining quality employees while minimizing turnover and controlling expenses. As minimum wages increase, operators may need to reevaluate staffing levels and scheduling practices while identifying opportunities to improve efficiency and reduce costs in other areas of their businesses.
In this week’s Franchisee Bytes section, we asked restaurant franchisees how they recognize and reward their top-performing employees. Their approaches range from awards, bonuses, and pay raises to promotions and companywide recognition. Some operators tie incentives directly to performance, while others reward employees who exemplify their company’s core values. Read their responses below to discover the different ways franchisees celebrate outstanding employees and show appreciation for a job well done.
[SPLIT]
Company: Cleavanger Enterprise LLC
Brands: 3 Jeremiah's Italian Ice
Years in Franchising: 4
Rising costs are an unfortunate reality of franchising, and the impact varies significantly by state. In Texas, there are no minimum wage increases. In Florida, consecutive annual increases have been occurring for several years. Understanding which markets are affected, and which aren't, is the first step.
I would caution both franchisors and franchisees against the instinct to raise menu prices at the first sign of cost pressure. Increasing prices can protect margins, but it can also reduce ticket volume, and for a business like ours, tickets are everything. Getting people in the door and giving them a great experience is the heartbeat of the operation.
Before passing costs on to guests, ask three questions: Is this market actually seeing a minimum wage increase? Is there a measurable impact on profit margins? And is this something the business can weather without affecting guest traffic? The answers should drive the decision, not the instinct to react quickly.
Company: Canary Enterprises, LLC
Brands: 5 Keke’s Breakfast Cafe
Years in Franchising: 12
Florida’s minimum wage reached $15 an hour this fall, and because the increases have been happening every year, we’ve had time to plan for them. Labor is a major expense in the restaurant business, so we pay close attention to how we schedule and staff each location. One advantage of Keke’s is that we typically operate from around 7:00 a.m. to 2:30 p.m. We don't staff for dinner or late-night hours, which makes a difference. We also emphasize training and retaining good employees. Constant turnover creates its own costs and makes it harder to run a consistent operation, especially during a busy weekend.
Company: Trident Burgers
Brands: 39 Captain D’s, 8 Slim Chickens, 6 Freddy’s Frozen Custard & Steakburgers
Years in Franchising: 19
For us, minimum wage increases aren't necessarily the driving factor behind rising labor costs. The reality is that most restaurant operators are already paying above minimum wage to remain competitive in today's labor market.
As we look at developing new restaurants, we're seeing firsthand how much wages can vary by market. For example, at a new Freddy's location we're developing, we anticipate starting employees at $15 per hour, roughly $2 more per hour than we typically pay in some of our other markets. When you're operating multiple restaurants, those differences can have a
meaningful impact on labor costs.
Ultimately, attracting and retaining great employees is an investment in the business. We must be thoughtful about how we manage those costs while continuing to offer competitive wages, develop our teams, and create an environment where people want to stay and grow.
Company: HM Sunshine, LLC
Brands: 4 Huey Magoo’s
Years in Franchising: 10
Minimum wage increases tighten our profit margins and require us to adapt and make more strategic pricing and staffing decisions without sacrificing service or quality.
We’re very intentional about recognizing and growing our top performers. Promoting from within is a big part of our culture, and many of our best leaders started by delivering great results on the front line. We support that with performance bonuses, recognition programs, development opportunities, and public celebrations of big wins.
-Brian Bailey, CEO, Team Bailey, 160 Domino's
There are myriad ways to reward/recognize top performers. We offer performance bonuses related to projections. We also provide rewards for customer service achievements, including team recognition, the Employee of the Year Award, the MVP Award, and retention awards for years of service. The coveted Peer Award (one employee is selected as the top performer by their peers) is also part of this program.
-Clement Troutman, CEO, Troutman Management, 2 Tropical Smoothie Cafe, 2 PJ’s Coffee of New Orleans
We have an employee of the month. When we have an excellent shift, we’ll buy the whole staff a good meal to recognize their hard work.
-David Weeks, CEO, The Bean Team, 9 Barberitos, 8 Dunkin’, 4 Newk’s Eatery, 1 Dunkin’/Newk’s co-brand
We have a bonus structure for what we pay every four weeks based on the four pillars of our business: cost of goods sold, labor, customer satisfaction, and cleanliness. We give employees two raises per year.
-James Bullock, Multi-Unit Franchisee, Ekon Investments, 14 Tropical Smoothie Cafe
We have a program focused on controlling costs, delivering guest experience scores, and reaching sales goals. Employees are recognized and rewarded when those goals are met. Our individual restaurants recognize their employees during birthdays and anniversaries and have funds for store parties and gift cards.
-Tamra Kennedy, Franchise Operator, Twin City T.J.’s, 6 Taco John’s
Through raises and bonuses for top performers. I like to treat my employees to a meal or a small reward on the days they are putting in long hours and large orders.
-Shak Patel, Multi-Unit Franchisee, Breaking Bread LLC, 6 Potbelly, 1 The Halal Guys
In our internal team message boards, we constantly recognize the folks who are going above and beyond to make their locations successful. At our year-end party, we celebrate the success we have accomplished together.
-Andy Cabral, CEO, Vigario Management, 25 Dunkin’, 9 Baskin-Robbins
We promote self-improvement at Bajco with incentives such as increased compensation and bonuses.
-Nadeem Bajwa, Co-founder and CEO, Bajco Group, 270+ Papa Johns