In January 2018, Ontario increased minimum wage from $11.60 per hour to $14, and some franchisees in the province wonder if this will negatively impact them.
At the same time, Ontario saw a decline of over 59,000 jobs, presumably in part because of this minimum wage increase.
Many franchisees were frustrated with the short notice they had about the required increase in pay; with just six months to get a game plan in place, many felt trapped and have struggled with their coping strategy.
While employees are understandably pleased with the increase in their paycheques, what does it mean long-term for franchises in Ontario and beyond?
Prices May Rise
Franchises unwilling to take the hit that a bump up in hourly wage would cause to their profits increased prices for products or services. While the prices have been raised selectively, consumers may be unhappy with having to pay more for, as an example, a hamburger.
It remains to be seen how much an increase in prices might cause consumers to shop elsewhere for similar products. Expect franchises to have to deal with the precarious balance of keeping their profit margins up while not alienating their customers.
Franchises May Cut Back
While it’s not clear if the dip in jobs in January was totally attributed to the minimum wage hike, some franchisees may panic and pull back on hiring for fear their bottom lines will be hit hard. The fact that another increase is scheduled for January 2019 means that payroll is taking a larger and larger chunk of every franchise’s bottom line in Ontario. This means many businesses will scramble to make up for the loss.
Other franchises, including Tim Hortons, are cutting back on offering employee benefits and paid breaks, causing much public outcry. And still others are cutting back on the hours they’re open.
And Yet, Franchise Growth Continues
Despite this setback, the Canadian Franchise Association predicts growth as usual for franchises in Ontario and Canada as a whole.
Not every franchise was affected by the rate hike, as many franchises have paid more than minimum wage.
It may take some time for the dust to settle in Ontario, but until then, franchises must do whatever is necessary to thrive. Other provinces may follow suit in increasing minimum wage, so this is an issue that all Canadian franchisees should be concerned with.
Susan Guillory is the President of Egg Marketing & Communications, a marketing firm specializing in content writing and social media management. She’s written three business books, including How to Get More Customers With Press Releases, and frequently blogs about small business and marketing on sites including Forbes, AllBusiness, The Marketing Eggspert Blog, and Tweak Your Biz. Follow her on Twitter @eggmarketing.