Saturday, September 27, 2014

Workers Unite (...and Franchisees too)!

     Small franchise owners have more in common with their workers than we've been lead to believe... The interests of so-called 'Corporate Stores' and 'Franchises' are frequently at odds.  Many have read the following, and it's often a revelation:  

"We are in the real estate business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent."

  -Harry J. Sonneborn, former McDonald's CFO

     This disclosure is eye-opening to the franchisee who thinks they are a "restaurateur" (and not a "tenant").  

     I assisted in the management at a couple of small businesses. I've been close enough to make entries in books and know the realities of running a small franchise store, and a corporate one.  I think most agree that a sudden and immediate shift to a $15 minimum wage tomorrow would be a jolting disastrous quake, which is why implementation of such policies are done gradually and not all at once- stirred, not shaken. 

     Anyone who has managed a small franchise can appreciate the cash flow issues involved. These are some contextual issues I'd think about though, as a small business person in today's market:

 1) Econ 101 dictates, and history proves, a rise in wages means more customers spending more money at your doorstep. There has never, not in our economic history ever, been a period when a rise in the minimum wage has resulted in a large-scale collapse of businesses, both large or small... if you know of such an event, please point it out.... it has not ever happened. What does happen is exactly the opposite- those workers have more liquidity to spend on your burgers and pizza (and this often begins directly with their lunches, which they purchase everyday on lunch breaks, at your very establishments which they're working for)... 

2) Corporate stores especially (opposed to franchises) are making more than enough in profits-after tax, after deductions which include wages, to offset the costs of these raises in wages. These same corporations like to focus their arguments on how they'd have to raise their prices to cover the wage expense, when the truth is that there is are often hundreds of millions, even billions of 'tricklle-up' AGI dollars which are available, in addition to the extra flowing income they'd make at their cash registers, to offset any wage hike. Hundreds of millions, even billions... Most people can't imagine the scale of how much available corporate cash this is... Large corporations count on this so they can try to scare you into thinking such a hike would mean economic collapse, when what it really means is a redistribution of profit from 'shareholders', to 'householders'... we have no sense of scale.... 

3) As for franchise owners trying to make ends meet... sorry to say, but as hard as you work, and as many stores as you might own, this is another one of those issues where you are going have to realize the corporate stores have once again sold you a bad bill of goods, in that the conditions you are functioning under are simply not contextually a viable economic model... If what you are telling us is correct, that with your (franchise?) fees you can only function in low-wage, race to the bottom, and in otherwise parasitic economic conditions- and not one where the economy is actually thriving... then you need to rethink your investments immediately... 

     Because the writing is on the wall... this is not simply a fun, Internet political argument thread... this is a very real trending economic consideration which will threaten your economic survival too, just like it threatens your workers, because your fates are not in conflict, but are linked... 

     Because once again, franchise owner, 'corporate', as you and I may well already may know... is not your friend...

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