By Tim Kolacz
99 cent burgers, 10 nuggets for a buck, 99 cent Frosty’s. Sayonara, adios, goodbye, never to be seen again.
It’s a reality that people want to make more money and fast food workers all over America want to get paid $30,000 a year. Wait, what?
$30,000 a year for flipping burgers and churning out nuggets? Yes, that is exactly what these workers are asking for; demanding, really, and the cities that they work in are passing laws to meet their demands. The annual salary of a worker making $15 an hour, working a typical work year of 2080 hours is $31,200. If they take off for two weeks a year, they make $30,000; so let’s give them the two weeks off.
So what is the owner of these establishments going to do?
First, is that the restaurant will raise prices so as to offset the cost of additional payroll. This is due to the increase in overall cost of making the same burger that was made yesterday at $10 an hour that now needs to be made at $15 an hour. They will also need to raise prices as it will also increase their Worker’s Compensation insurance. This is because Worker’s Comp coverage is solely based on dollars of payroll. So when the payroll goes up by 50%, so does the insurance cost. They will also need to increase the price some more as General Liability insurance is also a function of sales. Since the prices have gone up, if they still sell the same number of burgers today as they did yesterday, their revenue has increased, they now owe more insurance premium. Oh, yeah, how about those taxes.
Taxes will also go up. Payroll taxes, income on the revenue taxes, and an assortment of other state and local taxes that will suck up about 60% or so of the money you thought you were going to make this year.
One way to avoid the extra money going out is decrease staff. However, this is full of landmines too. If they decrease staff, those workers will now work more hours per week. Since most successful fast food owners have multiple locations, they then could run into needing to provide a huge benefit to their employees, health benefits. Once those workers hit the minimum annual hours worked limit for health coverage and the owner has 50 or more employees between all of their restaurants, ACA health care provision kicks in and health plans need to be offered.
Why don’t they move? The owner of the restaurant can’t move out of the city limits as the franchises are based on a specific territory. So if they want to leave, they leave the franchise where it is, sell it and another owner then comes in.
So what is an owner to do? One of the things they can do is reduce costs on their insurances through multiple avenues. One is to be safer. Having fewer injuries on the job reduces your experience mod rate. This Mod rate influences how much you pay for coverage. Next is to have any injuries be managed by a Claims Manager internal to the brokerage firm you hired to run your insurance program. This person can then discuss the claim with the carrier’s adjustor and make recommendations on treatment plans and how best to manage the worker’s ability to start back to work; even if it is on a limited basis.
The broker involved with running the insurance program can also influence the carrier into providing better pricing on the program. They do this by having worked with the carrier and the underwriter on previous occasions; they have a relationship with them and this can mean getting coverage or not. The broker can also access specific programs that they have exclusive access to with certain carriers. These programs allow for group pricing, even though you may be just a one location company.
And you don’t need to be a franchise owner to get special pricing. Group pricing models exist for multiple industries and are not always labeled as groups.
So, remember, the next time your order a burger, you may not be paying 99 cents. And now you know why.
Tim Kolacz is licensed to do business in all 50 states and Canada. He likes 99 burgers, but tends to add bacon to them for an extra 50 cents.