As expected, the Seattle City Council this week voted to increase the minimum wage to $15 per hour on a phased in schedule. By a vote of 9 – 0, the Council approved an amended version of the proposal pushed by Seattle Mayor Ed Murray and the $15 Now organization. The ordinance requires those companies considered “large employers” (identified as having more than 500 employees) to increase the wage to the $15 level over a span of 3 years, and illogically, counts as large employers all franchised businesses, regardless of the number of employees they have – solely because they are part of a franchise!!! Most other businesses will have 7 years to comply with the $15/hour mandate, but a franchised business, only 3. As passed, the bill poses problems for a host of businesses, but none more so than the franchised community. Consequently, the IFA has announced that they will file a legal challenge to the ordinance. IFA President and CEO Steve Caldeira told USA Today in an interview after the bill passed that the IFA would quickly and aggressively fight to overturn the law through the courts. In addition, they have created a web site, www.SeattleFranchiseFairness.com, to provide accurate information on this issue and the campaign to overturn it as we move forward. DDIFO as well as a number of other franchisee associations endorse the actions taken by the IFA and through the Coalition of Franchisee Associations, will work with the IFA however we can to assist their effort to overturn this ill-conceived legislation.
Aside from the swift and decisive actions of the IFA, other business reactions came swiftly in anticipation of the vote with some companies already looking to close operations and move them to more business-friendly environs. Two days before the council vote was taken, one Seattle-based entrepreneur and franchisor, Jerrod Sessler, resurrected plans to move his businesses out of Washington state rather than confront the challenges of the mandated $15 minimum. You can read that story here. And for those advocates who may think such rethinking of corporate growth plans are much ado about nothing, they need only look 15 minutes south of Seattle to the city of Sea-Tac, which envelopes the Seattle-Tacoma International airport and months ago established its own $15/hour minimum wage – companies impacted there have already begun adjusting operations accordingly. As to the specific impact that the Seattle vote will have on the restaurant sector, Trinity Financial restaurant expert Kevin Burke estimated this week that increasing the minimum wage from $7.25 to $15/hour will add up to $300,000 per year in increased labor costs to the typical QSR and thereby lead to thousands of employee layoffs or business failures.