Category: Blog

Why the Franchise Industry Can’t Solve the U.S. Wage Problem

As Posted by Ed Teixeira in BluMauMau

 

Raising the minimum wage in certain industries won’t change the economic realities of what’s causing the problem. Upon announcing the ruling by the New York State Wage Board recommending an increase in the NY State minimum wage to $15 an hour for fast food workers, Governor Andrew Cuomo stated that “A family of four can’t live on $18,000 a year.” It would be difficult to challenge that statement whether one lives in New York or North Dakota. The problem is that the cost to raise a family of four in the United States costs a great deal more than the Governors number. In fact the poverty threshold published by the Federal Government for a family of four is $24,250, which is a 40% increase over the $18,000 figure. Expecting the fast food industry to support that size increase is pure folly plus it misses the point. The fundamental problem surrounding the minimum wage issue is rooted in two key areas borne out by the Bureau of Labor Statistics:

1.         The U.S. has seen a substantial loss of manufacturing jobs, that has been accompanied by a shift to a more service based economy.

2.         The smallest disparity between the highest paid and lowest paid workers is in the Accommodation and Food Services Sector, which supports the premise that these jobs by their very nature are low paying.

According to the BLS, employment in manufacturing has declined steadily over the 1990-2013 period. By the mid-1990s, retail trade had become the leading employer in a number of states, and health care and social assistance was emerging as the largest employer in a few. Health care and social assistance became the largest industry in New York State in 1992 and in North Dakota in 1995. This map from the BLS details the shift from manufacturing to other jobs in the 1990 to 2013 period. It’s dramatic to see the changes that have taken place.

In terms of wage gaps, the Information industry has the largest wage gap from highest to lowest. The highest paid 10 percent of workers in the information industry earned nearly 6 times as much as the lowest paid 10 percent, with a 90-10 ratio of 5.8. The Information sector includes several smaller industries: publishing, broadcasting, telecommunications, data processing, and motion picture and sound recording. Finance and insurance, management of companies and enterprises, and professional, scientific, and technical services all had 90-10 wage ratios above 5.0 in May 2014.Accommodation and food services had a 90-10 wage ratio of 2.1.This means the difference in pay between the highest and lowest paid workers was smallest in this industry. Retail trade and agriculture, forestry, fishing and hunting both had 90-10 ratios below 3.0 in May 2014. This table from the BLS points this out in vivid detail.

The underlying reason why there is increased income disparity in the U.S. is due to a lack of manufacturing jobs, a shift to service/technology and an increase in unskilled workers, many of whom work in the hospitality and food service sector. Looking to franchise chains, especially the fast food sector to solve the problem or correct the cause is an exercise in futility.

What Exactly Does A Franchise Broker Do?

If you are interested in franchising, you have probably already begun looking at prospective franchises. But you have a million questions. How do you choose the right franchise for you? How much will it cost? How long will it take before I am in business. What is the industry reputation of a franchise? Where do I begin?

Well, a good place to begin is to contact a Franchise Broker, which brings up yet another question: What does a Franchise Broker do?

First of all, we do not sell franchises. Franchisors do, however, compensate brokers for guiding quality candidates through the process of selecting and acquiring a franchise. This does not cost you anything.

The job of a franchise broker is manifold, but essentially they perform two basic functions to prospective Franchisees:

  • provide education about franchising
  • guide Franchise Candidates through the process of selecting and acquiring a franchise.

Purchasing a franchise is a big decision with life altering possibilities. It is the job of the broker to help ensure that the Franchise Candidate makes the best decision possible about the kind of business that they will be running for the next 10, or 20, or 30 years.

To accomplish this a good broker should do the following:

  • identify the personal and business characteristics most important to the Franchise Candidate
  • create a personal business profile of the Candidate
  • match the Candidates qualifications, skills and requirements to appropriate franchises
  • get the Candidate the information necessary to make a decision
  • introduce the Candidate to the decision makers of the franchises they choose
  • act as an intermediary between the Candidate and the franchisor

If you are considering purchasing a franchise, don’t go it alone.

Contact us at OnlyFranchises. com and let us take some of the burden and the indecision from the process of selecting and acquiring your dream franchise.