Subway founder says minimum wage will cause raise in prices

[martybegan]

So....how is that increase in minimum wage going to bring Subway to its knees?

An increase from $7.25 to $9.00 is $1.75 an hour
Subway is open 12 hours a day and has about 5 employees

60 X $1.75 is $105 a day

And what is the daily profit margin on a subway?

Also add in the increase in FICA the company has to pay for, and unemployment insurance by state, and medicare.

Remember also, minimum wage increases make other groups hanker for increases, as they can point to the minimum wage earner and say "I used to make X more than them, and now I make Y more than them, I want X again"

This increases ALL costs. Inflation occurs, and the person who got the minimum wage increase loses any buying power they had.

And the cycle repeats. Didnt you take basic economics?

Labor is a cost of doing business

So is the rent on your store, franchise fees, advertising, taxes, utilities, food and supplies.

All can fluctuate and cost an owner more than $100. So can a Quiznos opening across the street.

So just because other things can negatively impact a business government should do it as well by fiat?

You can't compete against an minimum wage hike if that is was your labor force is worth. You can compete against a quiznos.

 

[martybegan]

So what are we talking here, maybe another $.25 to $.50 per sandwich?

Think you can afford it, cheapskates?

I can, however as people cannot, they will go there less, lowering revenue, while the increase in costs possibly puts the buisiness OUT of buisiness, or at a minimum requiring hours/staff cuts to stay profitable.



The issue with raises like this is you get ZERO return for increased cost. As you pay a more experienced employee more over time, you gain (theoretically) from thier experience. Just raising pay without a corresponding return just increases inflation on all of us.

 

[SteadyMercury]

So....how is that increase in minimum wage going to bring Subway to its knees?

An increase from $7.25 to $9.00 is $1.75 an hour
Subway is open 12 hours a day and has about 5 employees

60 X $1.75 is $105 a day

That is $735/week, or about $38k per year.

There are some examples of Subway franchisees financial breakdowns here SUBWAY Review ~ The Inside Stories

From that site:



So... an average subway does around 8k a week.

Rent varies about 300-700/wk usually
Subway takes 8%
Advertising is 4.5%
Cost of Goods about 33-37%
Labor is gonna be around 2000-2500
Electric 150-200
Random utilities another 100
Repairs/Maintence about 100

So overall an average subway will profit about say 600-1200 a week, depending on any number of factors. ( mainly Rent, and labor market ) If you supervise 3-5 of them, you could live comfortably. Supervising more than 6 or 7 is usually more than a 1 man job.



Here's a profit example based on gross sales of $1000 per day with the owner working in the store.
Obviously the utilities costs vary according to location but this is a common example.

For a Subway of $1000 (365k yearly) as an average sale per day, Here's a typical breakdown.
40% of 365k for Royalty and food : $146,000

$4000 average rent for 12 months : $48,000
Electricity, insurance average for 12 months($1400*12) = $16,800
Garbage, telephone , accounting misc for 12 months(500*12) = $6000
Employee's salary for 12 months ( 5000*12) = $60,000
Sale Tax(NY) 8.5% on gross sale = $29,200
Net profit before tax = $59000





Obviously the impact of $735/week or 38k annually is not insignificant on profit. Can probably do better analysis by doing the math vs. their labor estimates on raising the min wage, but I'm not motivated enough.

 

[Luddly Neddite]

Then you have posted incorrect information, as it depends how one has managed their finances up to retirement, where they live, what lifestyle they are comfortable with,and their income history.

Actually, my post did indeed discuss income management.

Subway has already cut the size of their "footlong" to 11 inches. How much did that save them?

It is 12 now

A few years ago, I knew a young man who worked there. He and I thought it was funny that when we actually measured the buns, they were 11 inches long.

If you say that has changed, I'll take your word for it because I haven't measured lately and I take you have.

 

[editec]

Subway Founder Fred Deluca: Minimum Wage Increase 'Will Cause Franchisees To Raise Prices'

“Wages directly affect prices,” he said. “It will cause franchisees to raise prices. There’s no doubt about it.”

Well yeah cuz, we all know that prices are never raised except when minimum wage is increased. Prices go up. Prices of the crappy meat they put in their crappy sandwiches go up and they pay it because its a cost of doing business.

$16BILLION in revenue in 2010 but they don't want to pay a living wage? Reminds me of an article I read about the child labor, little girls who make Barbie dolls but don't earn enough to actually buy the doll they make.

Yeah that might be true. Certainly that will be the excuse either way.

I know one self supporting kid working at a subway.

She works about 60 hours a week trying to keep her head above water.

 

[Mr Natural]

Subway has been around since the mid '60s.

Got any idea as to how many times the minimum wage has been raised since then?

And yet somehow, they've managed to survive and prosper.

 

[rightwinger]

Subway has been around since the mid '60s.

Got any idea as to how many times the minimum wage has been raised since then?

And yet somehow, they've managed to survive and prosper.

They have also raised their prices from the 60s

 

[Mr Natural]

Subway has been around since the mid '60s.

Got any idea as to how many times the minimum wage has been raised since then?

And yet somehow, they've managed to survive and prosper.

They have also raised their prices from the 60s

Yep, them and everyone else.

It's the nature of the beast.

 

[Trajan]

you know, some of this is just unreal. maybe I am just not as tolerant of nitwits as I used to be so please excuse me, or don't.

.example- "Labor is a cost of doing business" wow, well, No shit Sherlock.....so what does that MEAN???


news- the FF industry in particular works on a 3.5-6% profit margin, ( 10% is sky high, like for a NYC Times Square initial lease Mcdonalds franchisee) net net....so when the usual suspect(s) does another drive by "rich scummy franchisee bastards should share the wealth" thread, they deserve what they get. I think the owners /managers are allowed to earn a good living? The hours/work they put in? what do you think THEIR time is worth? $25-30 bucks an hour? you bet, easy.

so, when the usual suspect decides to throw around an additional labor cost of .50 cents an hour plus, on relative terms you are talking REAL money. Get a friggin grip please.

(Thx to SteadyMercury btw for the stats, I found the profit margin range from google.)

 

[Flopper]

Subway Founder Fred Deluca: Minimum Wage Increase 'Will Cause Franchisees To Raise Prices'

“Wages directly affect prices,” he said. “It will cause franchisees to raise prices. There’s no doubt about it.”

Well yeah cuz, we all know that prices are never raised except when minimum wage is increased. Prices go up. Prices of the crappy meat they put in their crappy sandwiches go up and they pay it because its a cost of doing business.

$16BILLION in revenue in 2010 but they don't want to pay a living wage? Reminds me of an article I read about the child labor, little girls who make Barbie dolls but don't earn enough to actually buy the doll they make.

You do know that in businesses like this labor is usually one of your larger costs compared to materials, right? And the wage increase you are talking about is of a much larger scale than any material cost increase, right?

Also, if you have to make working at Subway for minimum wage your long term career choice, you made some bad bad choices.

I believe there will be little or no prices increase due to the increase in minimum wage because in a retail business such as Subway, there are many exceptions to federal minimum wage. For example, young workers under age 20 can be paid $4.25/hr with an increase to $5.95 after 90 days. Minimum wage can be reduced for employees that receive tips. Full time students can be paid at a lower rate. In addition there are now states with minimum wages higher or equal to the federal minimum wage, plus there are number of other exception.

A company that has over 15 billion in profits, can easily afford to absorb the increase. However, it is very common for businesses to nudge up of their prices in response to increases in minimum wage. If competitors follow suit, then the prices stick.

 

[Trajan]

Subway Founder Fred Deluca: Minimum Wage Increase 'Will Cause Franchisees To Raise Prices'



Well yeah cuz, we all know that prices are never raised except when minimum wage is increased. Prices go up. Prices of the crappy meat they put in their crappy sandwiches go up and they pay it because its a cost of doing business.

$16BILLION in revenue in 2010 but they don't want to pay a living wage? Reminds me of an article I read about the child labor, little girls who make Barbie dolls but don't earn enough to actually buy the doll they make.

You do know that in businesses like this labor is usually one of your larger costs compared to materials, right? And the wage increase you are talking about is of a much larger scale than any material cost increase, right?

Also, if you have to make working at Subway for minimum wage your long term career choice, you made some bad bad choices.

I believe there will be little or no prices increase due to the increase in minimum wage because in a retail business such as Subway, there are many exceptions to federal minimum wage. For example, young workers under age 20 can be paid $4.25/hr with an increase to $5.95 after 90 days. Minimum wage can be reduced for employees that receive tips. Full time students can be paid at a lower rate. In addition there are now states with minimum wages higher or equal to the federal minimum wage, plus there are number of other exception.

A company that has over 15 billion in profits, can easily afford to absorb the increase. However, it is very common for businesses to nudge up of their prices in response to increases in minimum wage. If competitors follow suit, then the prices stick.

ignorance is truly bliss.....

 

[ScienceRocks]

No shit sharlock. Obama is praised by the left for his advancement of COMMUNISM, NOT his advancement of the economy. These bastards could care less about the little guy.

Fuck the little guy
Fuck the small businessman

Fuck freedom. This doesn't make sense becaues pure communism supposely doesn't even have a government. LOL. These people just want another state communist stalinist state from hell.

 

[ScienceRocks]

You do know that in businesses like this labor is usually one of your larger costs compared to materials, right? And the wage increase you are talking about is of a much larger scale than any material cost increase, right?

Also, if you have to make working at Subway for minimum wage your long term career choice, you made some bad bad choices.

I believe there will be little or no prices increase due to the increase in minimum wage because in a retail business such as Subway, there are many exceptions to federal minimum wage. For example, young workers under age 20 can be paid $4.25/hr with an increase to $5.95 after 90 days. Minimum wage can be reduced for employees that receive tips. Full time students can be paid at a lower rate. In addition there are now states with minimum wages higher or equal to the federal minimum wage, plus there are number of other exception.

A company that has over 15 billion in profits, can easily afford to absorb the increase. However, it is very common for businesses to nudge up of their prices in response to increases in minimum wage. If competitors follow suit, then the prices stick.

ignorance is truly bliss.....

This is why so many people keep getting fooled. Most people are nothing more then ignorant sheep. lol.

 

[Flopper]

Of course it will. Thats why I do not understand them wanting to do this? Majority of minimum wage earners are part-time and high school students. Why does the poor and middle class have to eat price increases in a time like this? The effect, IMO, will be the opposite of what they are wanting.

Nope. Over 79%% of those directly effected by minimum wage increases are over the age of 20. Over 50% of those effected are full time workers and only 8.4% are part time teenage workers. I could take your post more seriously if they were based on facts rather than erroneous assumptions.

Demographics of Low-Wage Workers | Raise The Minimum Wage

 

[BillyV]

I believe there will be little or no prices increase due to the increase in minimum wage because in a retail business such as Subway, there are many exceptions to federal minimum wage. For example, young workers under age 20 can be paid $4.25/hr with an increase to $5.95 after 90 days. Minimum wage can be reduced for employees that receive tips. Full time students can be paid at a lower rate. In addition there are now states with minimum wages higher or equal to the federal minimum wage, plus there are number of other exception.

A company that has over 15 billion in profits, can easily afford to absorb the increase. However, it is very common for businesses to nudge up of their prices in response to increases in minimum wage. If competitors follow suit, then the prices stick.

Well, according to the Department of Labor:

A minimum wage of $4.25 per hour applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $7.25 per hour effective July 24, 2009.

And:

An employer may pay a tipped employee not less than $2.13 an hour in direct wages if that amount plus the tips received equal at least the federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 a month in tips. If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.

U.S. Department of Labor - Wage and Hour Division (WHD) - Minimum Wage

Employing a new teenager every 90 days doesn't seem like a good long-term strategy, and after 90 days it goes back to the $7.25 minimum, not $5.95. And it is still the employer's responsibility to ensure that tipped employees make the minimum wage or make up the difference.

Yes, I agree that Subway will somehow make it through an increase, but how many franchisees (and other micro sized business entities) will either not survive or will not hire that extra person (or let go that current worker) that they could use but now cannot afford?

 

[Claudette]

Of course it will. Thats why I do not understand them wanting to do this? Majority of minimum wage earners are part-time and high school students. Why does the poor and middle class have to eat price increases in a time like this? The effect, IMO, will be the opposite of what they are wanting.

I agree. Minimum wage is something folks earn for mayby 30 days. After that time if they are good enough for the job they make more money. Hell. I don't think I ever worked for MW anywhere I've ever worked and I'll bet most posters on the board can say the same.

The only winners in the minimum wage war are the high school kids and people with a second job. MW was never meant to be lived on and if your someone still making it then you have to be a big loser in the game of life.

Raising the MW will surely keep new hires to a low and when you throw Obamacare into the mix who knows what we will have. Think we will be seeing many small businesses closing.

 

[Flopper]

I believe there will be little or no prices increase due to the increase in minimum wage because in a retail business such as Subway, there are many exceptions to federal minimum wage. For example, young workers under age 20 can be paid $4.25/hr with an increase to $5.95 after 90 days. Minimum wage can be reduced for employees that receive tips. Full time students can be paid at a lower rate. In addition there are now states with minimum wages higher or equal to the federal minimum wage, plus there are number of other exception.

A company that has over 15 billion in profits, can easily afford to absorb the increase. However, it is very common for businesses to nudge up of their prices in response to increases in minimum wage. If competitors follow suit, then the prices stick.

Well, according to the Department of Labor:

A minimum wage of $4.25 per hour applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $7.25 per hour effective July 24, 2009.

And:

An employer may pay a tipped employee not less than $2.13 an hour in direct wages if that amount plus the tips received equal at least the federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 a month in tips. If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.

U.S. Department of Labor - Wage and Hour Division (WHD) - Minimum Wage

Employing a new teenager every 90 days doesn't seem like a good long-term strategy, and after 90 days it goes back to the $7.25 minimum, not $5.95. And it is still the employer's responsibility to ensure that tipped employees make the minimum wage or make up the difference.

Yes, I agree that Subway will somehow make it through an increase, but how many franchisees (and other micro sized business entities) will either not survive or will not hire that extra person (or let go that current worker) that they could use but now cannot afford?

I eat at Subway about once a month and I have never seen the same employees twice. I would say the turnover at Subway is very high and many do not make 90 days. Yes, Subway with 15 billion in earnings from 33,000 stores in 86 countries, will definitely survive; much better than their employees.

 

[Rozman]

Subway Founder Fred Deluca: Minimum Wage Increase 'Will Cause Franchisees To Raise Prices'

“Wages directly affect prices,” he said. “It will cause franchisees to raise prices. There’s no doubt about it.”

Well yeah cuz, we all know that prices are never raised except when minimum wage is increased. Prices go up. Prices of the crappy meat they put in their crappy sandwiches go up and they pay it because its a cost of doing business.

$16BILLION in revenue in 2010 but they don't want to pay a living wage? Reminds me of an article I read about the child labor, little girls who make Barbie dolls but don't earn enough to actually buy the doll they make.

Don't like the salary at Subways....
Don't work there...

It's just that simple!