How are minimum wage increases affecting your bottom line?

“I’ve worked hard, paid my taxes, raised my family, operated a small business, and stayed here through good times and bad, says Richard Pfeffer, founder and owner of Gritty McDuff’s, a brew pub in Maine’s largest city. “But I’ve never seen city leaders so determined to drive away small businesses and burden taxpayers as they are with this proposal going to voters to raise Portland’s minimum wage to $19 an hour by 2028.”

Sound familiar? For multi-unit restaurant franchisees with locations in California or large U.S. cities where the cost of living is high, it sure does. Cost of living by state lists the 5 least expensive states: Mississippi, West Virginia, Arkansas, Oklahoma, and Kentucky. The 5 most expensive places to live—and do business—are Hawaii, Washington DC, California, New York, and Massachusetts.

A quick look at the average cost of housing—ranging from lowest (Alabama, $220,000) to highest (California, $825,000)—supports the idea of different minimum wages based on how much it costs to do business—and live—in a given state, or in vastly different parts of a state.

Some U.S. cities with higher-than-average minimum wages already, are planning further increases in 2026. These include Seattle ($20.76 today to $21.30 in 2026); New York ($16.50 to $17.00); and both Los Angeles ($17.87) and Portland, Oregon ($15.45) are set to hike rates by July 2026. And, of course, the federal minimum wage of $7.25 has held steady since it was set in 2009. Who would work for that today? For a deeper look into minimum wages by state for 2026, click here.

Now we all know statistics can be misleading. The classic example of Bill Gates walking into a party makes everyone—on average—a millionaire. Nice, but when the party’s over, you can’t take that to the bank!

Okay, enough with the numbers already, as my grandfather would say. Let’s see what some real-life multi-unit restaurant franchisees have to say!

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Franchisee Bytes: Favorite books?

SETH GOLDSTEIN

Company: Management 360 LLC

Brands: 9 Jersey Mike’s, 4 Sola Salon Suites

Years in franchising: 40

Mandatory annual minimum wage increases present many challenges. It really makes it difficult to give merit increases if the minimum keeps increasing every year. We need to focus on service, use all the technology, and take price increases where appropriate. It’s not just the wages, it’s the FICA tax increase, it’s the workers’ comp/disability increase, and insurance, which are all based on payroll. We increase prices selectively, but we would rather give pay raises through a merit-based system. Jersey Mike’s provides a great value to the consumer, so our sales continue to grow. That growth helps mitigate any minimum wage damage to the bottom line. We also tie our front-line management’s compensation to the P&L.

CHARLES R CHADWICK, JR.

Company: Franchise Owner, L&L Hawaiian Barbecue

Brands: 5 L&L Hawaiian Barbecue, 3 Round Table Pizza, 2 Pizza Factory

Years in franchising: 12

The increase in minimum wage has required us to be more strategic with employee scheduling. Combined with rising costs of goods, this has necessitated price adjustments to maintain prime cost targets.

GREG THOMAS 

Company: President, LSGF Management 

Brands: 4 Smoothie King, 71 Great Clips, 1 Salty Dawg Pet Salon + Bakery (Area Developer) 

Years in franchising: 21

Thomas is a member of the Multi-Unit Franchising Conference Advisory Board. The company has been a Smoothie King franchisee since 2008. Although some examples are for his hair salon business, they can be applied to restaurant operations.

I can say unequivocally, they’re not. As a franchisee and business owner, I get to set my own prices. When my costs go up, I will not allow my businesses to fall victim. While it’s important to be competitive and to know what my competitors are charging, their prices don’t dictate what I do because I’m not selling a commodity. Our offerings are a bit unique. Our staff and service are a bit better. Everything is not equal.

When it comes to prices, what’s most important to me is our bottom line. Regardless of brand (Smoothie King, Great Clips, Salty Dawg Pet Grooming, etc.), what I aim for is store-level profitability of 20% of sales. That’s where I need to be to cover my overhead, to make a fair return on my investment, and to have a healthy balance sheet so that I can reinvest, grow my business, and create more jobs and opportunities for my staff.

This store-level profitability goal of 20% of sales—that’s my number, call it Greg math. In lower-volume stores it might be 15%, and in higher-volume stores it might be 25%, but on average, I think 20% of sales is a good number. Keep in mind, that’s store-level profitability, not cash flow, not EBITDA. Why 20% of sales? Because as a business owner, I need to recoup my initial investment (be it debt to myself, to a bank, or to a partner). I need to pay for my corporate overhead (accounting, HR, GM/franchisee expenses, etc.). I need to pay for capital improvements, remodels. And I need to make a fair return on my investment. I know I’m conflating a few things here, but if debt service is 10%, if corporate overhead is 4%, that leaves only about 6% to play with. That’s pretty tight, pretty efficient, pretty fair.

Back to the original question about cities and states raising their minimum wage… I believe that if you pay your employees the minimum, you’ll get the minimum out of them. My mission in Great Clips and Salty Dawg is actually to have the highest “effective wage” in the market (base wage + productivity + commissions + tips). I believe that if we hire good people, if we treat them with respect, and if they can make more money with us than with our competitors, they’re less likely to ever leave us. And therein lies the secret to our success: low turnover.

The government can and will make changes to the minimum wage, but I have options too. When costs go up, prices go up, but the profit margins will ultimately stay the same. I realize there are short-term pros and cons to an increase in the minimum wage, but in the long run I’m not sure that anyone really benefits.

FRANCHISEE BYTES

Favorite books?

The Tortoise and the Hare is a simple book that taught us at an early age to do things slowly and steadily rather than quickly and carelessly to win the race.
—Phong Huynh is the 2025 American Dream MVP for achieving remarkable success in his new country. He is Co-Owner of Fuego Investments, which operates 30 El Pollo Loco restaurants. He’s been in franchising for 15 years.

What It Takes by Stephen A. Schwarzman, Chairman, CEO, and co-founder of Blackstone.
—Nick Crouch is Co-Winner of the 2025 Single-Brand Leadership MVP for achieving leadership with a single brand. He is Co-CEO of Dyne Hospitality Group, which operates 118 Tropical Smoothie Cafes. He’s been in franchising for 13 years.

The Power of Vulnerability by Brené Brown.
—Chanel Grant is the 2025 Diversity, Equality, and Inclusion MVP for demonstrating exceptional commitment to the promotion of diversity, equity, and inclusion in her organization. She is co-owner of Healthy Living Ventures, which operates 6 Tropical Smoothie Cafe, 3 Hand & Stone Massage and Facial Spa, and 1 Vio Med Spa locations. She has been involved in franchising for 10 years.

Atlas Shrugged by Ayn Rand. It was a life-changing book that I was lucky enough to find when I was a teenager.
—Christopher Aslam is CEO & Principal at Rock Strategies and various entities. He operates 59 Jack in the Box, 5 Golden Chick, and 5 Hawaiian Bros Island Grill locations. He’s been in franchising for 29 years.

The Deming Management Method by Mary Walton.
—Tamra Kennedy is the Franchise Operator of Twin City T.J.’s, which operates 6 Taco John’s. She is an IFA Foundation Board Trustee, an IFA Board Member, and Past Chair of the IFA’s Franchisee Forum. She’s been in franchising for 41 years.

Good to Great by Jim Collins.
—Tom Lovelace is Owner/President of the Tom Lovelace Group, which operates 96 Papa Murphy’s. He’s been in franchising for 35 years.

Tap Dancing to Work: Warren Buffett on Practically Everything by Carol Loomis.
—Amol R. Kohli is Managing Partner at Legacy Brands International and Chairman of Brix Holdings, which Legacy acquired this past July. As a franchisee, he operates 63 Orange Leaf, 60 Clean Juice, 36 Red Mango, 6 Humble Donut Co., 3 Souper Salad, and 1 Smoothie Factory + Kitchen locations. As franchisor, he also operates 61 Friendly’s. He’s been in franchising for 16 years.

Taking People with You by David Novak.
—Sam Chand is the 2025 Multi-Brand Leadership MVP for achieving brand leadership with multiple brands. He is CEO of Jasam Enterprises, which operates 35 KFC and 25 Checkers & Rally’s. He’s been in franchising for 27 years.

Anything by J. R. R. Tolkien. For business, I love two Simon Sinek books, Start with Why and Leaders Eat Last.
—Chad Given is Brand President of Sizzling Platter, which operates 361 Little Caesars, 107 Little Caesars Mexico, 185 Wingstop, 92 Jamba, 33 Jersey Mike’s, 31 Dunkin’, 7 Sizzler, 5 Red Robin, and 1 Cinnabon. He is the 2025 Mega-Growth Leadership MVP for achieving excellence in growth and expansion. He’s been in franchising for 25 years.

The Comfort Crisis: Embrace Discomfort to Reclaim Your Wild, Happy, Healthy Self by Michael Easter. People are most afraid of change, and this book challenges you to change and get out of your comfort zone.
—David Weeks is CEO of The Bean Team, which operates 9 Barberitos, 8 Dunkin’, 4 Newk’s Eatery, 1 Dunkin’/Newk’s co-brand locations. He’s been in franchising for 22 years.

For fiction, it is The Stormlight Archive by Brandon Sanderson. Nonfiction is Atomic Habits by James Clear.
—Alex Karcher is Operating Principal of JCK Restaurants, which operates 61 Carl’s Jr., 11 Jersey Mike’s, 8 The Human Bean, 8 Dave’s Hot Chicken, and 1 Hawaiian Bros. He’s been in franchising for 14 years.

Crushing It by Gary Vaynerchuk.
—Lawrence Kourie is Owner-Operator of 22 Dave’s Hot Chicken restaurants. He’s been in franchising for 12 years

I read only nonfiction and business books. I couldn’t pick just one. There are so many great takeaways from people’s real experiences.
—Mike Kulp is CEO of KBP Brands, which operates 828 KFC, 119 Arby’s, 85 Sonic, and 56 Taco Bell locations. In 2016, he served as Chair of the Multi-Unit Franchising Conference. He’s been in franchising for 26 years.

The Quran.
—Yunus Shahul, with his brother Thameem, is owner of Smartfoods Group, which operates 24 Cousins Maine Lobster and 1 German Doner Kebab locations. He’s been in franchising for 7 years.

Die with Zero by Bill Perkins.
—Carrie Ayers (along with husband Josh Ayers) is the 2025 Veteran Entrepreneurship MVP for outstanding performance, leadership, and innovation by military veterans. They operate 6 Playa Bowls and have been in franchising for 5 years.