WSJ: Increase wages or expand?

Franchises are paying the cost of being the boss, and right now that often means forgoing expansion plans.

The Wall Street Journal reported that franchises like McDonald’s are raising wages in an attempt to beat out competition for workers. However, for brands like Toppers Pizza*, trying to keep up increases labor costs, which would then have to be passed on to customers.

The pizza chain is unwilling to do this, and has been forced to put expansion plans on hold instead.

“We don’t want to be the first ones to increase prices,” Kendall Richmond, chief financial officer of Toppers Pizza, told the Journal. “We’re looking at every line item on the expense side and looking at where we can decrease costs.”

Richmond went on to tell the news source that for every $1-an-hour increase in wages, total labor costs rise 0.75 percent. At the same time, not raising wages to retain employees can come with its own costs, including the expense of training new workers.

In short, today’s franchises face a number of difficult decisions, balancing keeping employees happy with a healthy wage against plans for opening new locations across the country.

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