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DECEMBER 2024
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Unintended Consequences Higher Minimum Wages Send Workers Over a Benefits Cliff
I’ve often noticed that fast-food franchisees have a far better
promotions to management. Even though they might earn $5,000–$10,000 more a year, any pay raise he can offer doesn’t make up for the benefits they would lose. This robs him of one of the most powerful tools for incentivizing his people to work hard and rise in the ranks — a pay raise. These employees are holding their income down in order to keep their home economy up . The benefits cliff is a growing issue. Half the states implemented minimum wage increases this year, and seven now require employers to pay more than twice the federal minimum wage of $7.25. I’m not proposing keeping minimum wages low. I don’t know the solution to this problem. Maybe workers who get raises should be allowed to keep those benefits for a period of time after they cross that income threshold, or perhaps the benefits should phase out less abruptly for recipients with kids. I don’t know the answer. Workers need to be paid more than the $7.25 an hour federal minimum wage set by Congress 15 years ago. Inflation has eroded its buying power by 46% since Congress passed it in 2009. Again, my clients already understand this better than the politicians. Ask franchisees if they would consider paying their workers $7.25 an hour, and they invariably say, “That’s not enough.”
understanding than most politicians of what it means to live life at the lower end of the income spectrum.
My clients know the federal minimum wage is sadly outdated. They are standing at the intersection of government policy and the real lives of hourly workers. They understand the on- the-ground impact of policy changes and economic volatility better than anyone else I know. They see what happens in a low-income household when gas goes from $4.10 a gallon to $4.80: Employees can’t afford to make essential car repairs, and they don’t get to work on time. They know what a single mother does when the patchwork of child care arrangements she has cobbled together falls apart. She misses work that day. It’s interesting to me that my clients see the grassroots impact of social policies and economic trends more clearly than the people making the policies. What if the politicians looked more carefully at the consequences of their decisions for people at the lower end of the income spectrum? What if they took into account the day-to-day realities that franchisees are seeing? That could only be an improvement. Because right now — they’re not getting it right. – Nate Riordan
I was discussing states’ recent minimum wage increases with a client.
“The politicians who are pushing those numbers don’t understand that they are going to cost my employees $30,000 a year in government benefits,” the franchisee said. He’s right. A parent with two young children whose income is below specified limits can qualify for as much as $30,000 in government benefits and tax credits, according to a study by the Atlanta Fed. These means-tested benefits include Supplemental Nutrition Assistance, child-care subsidies, housing rental vouchers, Medicaid, health care subsidies, and the Earned Income and Child Tax credits. If a low-wage worker gets a raise, they risk losing it all — aka falling over “the benefits cliff,” the study says. Rising wages actually leave these workers with less money in their pockets. This unintended result also has an indirect impact on this franchisee’s ability to run his business. He considers a sizable number of his workers underemployed because they refuse
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Cat-apulting Into History The Feline-Flying Military Tactic That Never Took Off Throughout military history, you’ll find strategic experiments ranging from the genius to the downright bizarre. But few can top the zany brainchild of Franz Helm, a 16th-century German artillery aficionado whose bright idea left historians — and cat lovers — utterly bewildered. Let’s set the scene with Helm’s magnum opus, the “Feuer Buech,” published in 1584, a treasure trove of ( literally ) explosive innovations in warfare. Imagine this: a battlefield in the Renaissance, not just filled with the clang of swords and the thunder of cannons, but also — wait for it — flying, flaming cats. Yes, you read that right. Franz Helm’s groundbreaking military tactic involved jetpacks for cats. Picture a kitty, strapped with a sack of gunpowder, zipping through the air like a furry missile aimed at enemy strongholds. The hope? These feline projectiles would scamper back to their homes — presumably in enemy territory — and start a blazing inferno. One can only wonder about how they would train cats to become arsonists. The method was straightforward: kidnap an enemy cat, strap it into a gunpowder-laden backpack, light the fuse, and hope Mr. Whiskers doesn’t get cold paws about blowing up its evil overlords. Preserved for posterity at the University of Pennsylvania, the “Feuer Buech” reminds us of the lengths human creativity can go — especially when combined with a profound misunderstanding of cat behavior. As any cat owner will tell you, cats have their own agendas. The chances of a cat completing its fiery mission are about as high as it bringing you the morning newspaper. Thankfully, we have no evidence that this pyrotechnic plan ever came to pass. Considering cats’ notorious independence, we can rest assured that no self-respecting felines took part in these explosive escapades. So, next time you’re cuddling with your cat, be thankful its biggest inclination is to knock pens off your table rather than infiltrate enemy castles with fire.
Fast Food Gets Faster Need for Speed
How fast can fast food get?
The entire industry has shaved the average time elapsed between arriving at a drive-thru lane to receiving your food by almost 8%, or 29 seconds, according to a survey last year by QSR Magazine. Restaurant operators are innovating like mad to speed up their operations even more. Taco Bell’s purple-neon, two-story “Defy” prototype in Brooklyn Park, Minnesota, aims to get customers through the drive-thru in two minutes or less. The facility has separate drive-thru lanes for mobile customers, delivery drivers, and traditional orders and delivers each order from a second-story kitchen via vertical lifts. In a test, QSR found Defy reduced customers’ total drive-thru time sharply to just a little under three minutes, compared with an industry average of 5 minutes 43 seconds. McDonald’s has opened two highly automated stores, in Fort Worth, Texas, and Denver, where employees begin processing online orders before customers arrive and robots prepare and deliver it via a conveyor belt. Although automation isn’t a slam- dunk, it reflects progress. Order-filling accuracy fell by 8%, but food delivery to customers rose by nearly 200 seconds. Other chains are testing designs that combine drive-thru with speedy access to order pickups. Whataburger opened a digital kitchen last year that serves mobile and delivery customers with automated delivery through Apex smart lockers. Employees prepare the online order, place it in the locker, and move on to the next task. Jack in the Box and Del Taco operators also are trying automated stand-alone facilities with a pickup area just inside the building. The risk in emphasizing speedy drive-thru and pick-up service, some industry experts say, is that restaurants are becoming giant vending machines. Visiting a fast-food restaurant has become more of a transaction than a dining experience. Not all chains are removing the human touch. Chick-fil-A opened a two-story drive-thru restaurant in Atlanta with a capacity of 75 cars at a time, sheltered by a kitchen built overhead. But employees still collect orders from the kitchen and hand them to customers in person. And so far, the industry’s quest for speed appears to be paying off. Visits at fast food and fast casual restaurants have risen fairly consistently through 2023 and the first quarter of 2024, outpacing the up-and-down traffic trends at full-service restaurants, according to Placer.ai. Their increasing speed of service may be giving fast food purveyors an edge.
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“The only limit to our realization of tomorrow will be our doubts of today.” — Franklin D. Roosevelt
Going Hollywood Fast-Food Chains Break Into the Media Biz
As customers drift away from fast-food dining rooms toward drive- thru and delivery orders, chains are trying novel ways to recapture more of their time and attention.
making a positive impact on the world,” a brand executive told Fast Company. Starbucks is partnering with Sugar23, a media company founded by Michael Sugar, the producer of such films as “Spotlight.” Another newcomer to content production is Chuck E. Cheese. The pizza chain said last January that it would tap into adults’ nostalgia for its iconic games by offering a game show for adults. The company is working with Magical Elves, the producer of the reality show “Top Chef.” In a setup similar to “Squid Game,” pairs of adults will compete in super-sized arcade games many viewers will remember from their childhood, such as pinball, air hockey, and the human claw. The ventures give brand executives closer control over their message, protecting them from unintended association with objectionable online content. The strategy of using media content to sell products isn’t new. It extends back to the 1930s, when Procter & Gamble sponsored radio soap operas to sell branded soap. The latest moves are unfolding much more rapidly, however, and in some cases are likely to extend deeper into families’ day-to-day lives.
They are borrowing some tools from Hollywood.
Three big restaurant companies announced ventures with outside producers this year to create entertainment content to reinforce their brand image. Chick-fil-A recently launched a free entertainment app called Play, offering such video content as “Legends of the Evergreen Hills,” a series about a young protagonist’s adventures in a fantasy world. The nation’s third-largest restaurant chain says the new app is a response to changes in family mealtimes, which are more often spent consuming online content. The app will also feature the company’s famous cows, scripted podcasts, recipe and craft videos, and e-books focused on themes like generosity, friendship, creativity, and problem-solving. The company hopes providing wholesome entertainment for its 12-and-under customers will lead parents to view Chick-fil-A more positively. Last June, Starbucks, the No. 2 chain, jumped into filmmaking with the formation of Starbucks Studios to produce original entertainment. The chain will feature stories of people “from young, emerging artists to innovators, changemakers and others who are
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600 Stewart Street #1300 Seattle, WA 98101 westcoastfranchiselaw.com (206) 724-0846
In This Issue 1
The Perverse Effect of Minimum Wage Increases
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How Fast Can Fast Food Get?
Unravel the Myth of the 16th‑Century Rocket Cat
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Fast-Food Chains Go Hollywood
Empower Employees With Online Shift Swaps
Many restaurant managers are in a bind when scheduling employees’ shifts. Young workers expect flexibility, predictability, and some control over their schedules. But staffing each shift with just the right number of workers is a bottom-line issue for managers. Some chains are addressing the challenges with new technology. An operations platform called Crunchtime predicts staffing needs for each shift based on customer traffic. It also offers a free scheduling app, Teamworx, that allows employees to trade shifts online. Managers can approve shift swaps via the app. Two restaurant chains, Sweetgreen and Five Guys, are using the platform to manage staffing more efficiently, according to Nation’s Restaurant News. Crunchtime says Jersey Mike’s and Caribou Coffee are also using its technology. Shift swaps have traditionally been a cumbersome process, often requiring multiple signatures on paper forms. New shift-swapping technology places more responsibility on workers to anticipate time- off needs and find someone to cover for them. At best, the process can reduce no-shows and foster collaboration among employees. Streamline Shift Swaps to Retain Employees Tech Power
Managers need to set guardrails, however. Poorly run shift swaps can be a nightmare, creating confusion and inadequate staffing. Also, hours worked must be monitored to comply with overtime and other labor laws. Other companies in service industries are finding benefits in shift swaps. IKEA has been testing a self-scheduling intervention at some U.S. stores. In the past, employees who wanted to exchange shifts with a coworker had to go through the tedious process of getting paper forms signed by the other employee and both of their managers. Under the new program, employees use an app by Kronos to update their availability before schedules are posted. Afterward, they are allowed to swap shifts by sending direct requests to coworkers, according to the Shift Project, a research organization. The initiative is part of a larger effort by IKEA to improve pay and working conditions. The effort has lowered voluntary 2023 turnover in U.S. stores to about 25% from 33% previously, according to Bloomberg.
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