After quick-serve workers walked off the job in this spring’s strikes in Chicago and other cities, some franchisees did agree to raise their starting wage. Jennifer Epps-Addison, economic justice director of Citizens Action of Wisconsin, which has organized some fast-food worker strikes, says there were some instances in which franchisees raised wages for employees by 25–50 cents an hour.
While the worker strikes—which also targeted Wendy’s, Subway, Burger King, Taco Bell, Dunkin’ Donuts, and a few retail brands—were not “devastating” to the corporations, they served as a wake-up call, Epps-Addison says. “We have a lot of people in this country who work in the low-paying service-sector industries who are the working poor,” she says.
About one-third of all jobs in Chicago, for example, are now considered low-wage jobs, according to the Workers Organizing Committee of Chicago. Further, six out of 10 of the fastest-growing U.S. jobs by 2020 are projected to be in low-wage occupations, including retail and the “food preparation and serving” sector, according to the U.S. Bureau of Labor Statistics.
“We have to make sure that these are decent jobs,” Gebreselassie says. “If we don’t, more workers will be relying on public assistance and will be able to spend less, which impacts our economy.”
Because the national minimum wage does not increase annually—it was last raised in 2009—it has not kept in line with inflation, proponents of higher wages argue. Gebreselassie says the minimum wage should be much higher than $7.25 per hour because that adds up to $14,500 a year on a 40-hour work week, and most fast-food workers aren’t given full-time hours. The low wage forces quick-service workers to find other part-time jobs or to seek public assistance to support themselves, the proponents say.
However, only about 5 percent of restaurant industry workers are at the federal minimum wage level—the rest are earning above that—and a little more than 50 percent are teenagers, DeFife says, citing the U.S. Bureau of Labor Statistics. “In many cases, minimum wage is a starting wage and high performers are moved up quickly. Eighty percent of managers and owners started at entry-level jobs; the industry is really an industry of opportunity,” he says.
While some suggest the $7.25-per-hour minimum wage is sufficient in the fast-food industry because many employees are students or just out of high school or college, the reality is that more quick-service workers are older and are using the jobs as a way to support themselves and their families, Gebreselassie says. The U.S. Bureau of Labor Statistics reports that the median age for a fast-food worker is 28, while the median age for female fast-food workers is 32.
In certain states and cities, a wage that is “much higher” than the national minimum wage is necessary in order for workers to survive, Westin says.
“Looking at rents in New York, it is very clear that incremental increases aren’t going to get us there,” he says. “Workers believe in what they are demanding: $15 per hour is what they need to live off of.”
While several operators either keep to a minimum-wage model or let their franchisees determine wage rates, many quick-service and fast-casual companies are finding that higher wages are developing a strong company culture. Take Boston-based Boloco, a 21-store fast-casual burrito chain, as an example. None of its employees make less than $9 per hour, and some earn as much as $17 per hour. The average wage for all employees is $11.50 per hour.
“Our objective is to build a successful, profitable business model and pay people as much as possible. We are trying to increase wages,” says John Pepper, CEO and cofounder of Boloco.
The company has always paid higher than the national minimum wage, Pepper says, because he believes it is the right thing to do and because it results in happier, more reliable employees. “If we are asking for all these things from our employees—real hospitality, really taking care of guests, and being loyal to the brand—you have an obligation to give them a fighting chance,” he says. “If you don’t give people a path to move beyond the wages they are at now, they are going to lose faith in the system. Once they lose faith, it is hard to restore it.”
One of the reasons employee theft is so high in the restaurant industry is that many operators do not pay their employees enough, Pepper says. “Why not try to get ahead of that? Our philosophy is, let’s set a standard so high that it pays for the better benefits that we are paying,” he says.
Boloco’s wage and benefits structure is modeled after successful restaurant operators such as Starbucks, which provides its employees with better wages and health benefits. Pepper says Starbucks CEO Howard Schultz’s keynote address at this year’s National Restaurant Association Restaurant, Hotel-Motel Show inspired him with a message about the “softer side” of building a business.
To that end, Boloco pays higher-than-average wages, has a robust health plan for employees, and offers a four-week sabbatical to all employees. As a result of this pay structure, Boloco’s turnover for team members is 64 percent, compared with the national restaurant industry average of 113 percent.
As Boloco looks to grow its company, Pepper wants to prove to potential investors that restaurant operators can be profitable while paying higher wages.
“Higher wages lead to hard-working people who add value to shareholders,” he says. “We have found that there are a lot more questions from investors and capital equity firms in recent years on the value that the company brings to the picture. The value has to do with your food and sourcing, your impact on the environment, and how you are treating people in all ways.”
Investors aren’t the only ones who want employees to be treated well. A recent survey from Restaurant DemandTracker found that 48 percent of consumers prefer to visit restaurants that treat their employees well.
Firehouse Subs’ Fox says he knows the way workers are treated is extremely important. But in his chain’s survey of more than 1,700 employees, most said their job satisfaction was dependent upon their relationship with the store’s general manager—not their wages. “They are much more likely to be dissatisfied and leave their job because of that [relationship],” Fox says. As a result of Firehouse’s strong emphasis on the employee-manager relationship and other employee initiatives, the brand’s turnover rate is 80 percent.
Still, Fox says, restaurant industry leaders can do a better job of inspiring workers to achieve more in their jobs. “Those companies that inspire leadership to in turn motivate their staffs are great companies,” he says. “We are an industry of maximum opportunity as long as they [employees] have the drive, talent, and ambition.”