Impact on wages with productivity

A franchise is a business that is often operated by one franchisee that is overseen and branded by a bigger and often a multinational or national company or the franchisor. Occasionally, the franchisor may be obliged to visit the franchisee occasionally to ensure compliance with franchise rules and regulations, for example, the employees may be required to dress and act in a particular manner to preserve the brand name (Flinn, 2011). The government also expects that the employer honors terms of contract to protect employees from being exploited, for example, compliance to agreed wages, working hours, non-discrimination and other benefits. The following is a discussion of the challenges faced by USA franchise businesses in implementing the new minimum wage requirement and the general impact of wage increment on productivity of a business Minimum wage definition Minimum wage stipulates the least amount payable to an employee for specific working hours set out by a regulating authority such as a wage council, wage board, specific industrial tribunals or courts.

The regulations are formulated to protect employees from being underpaid by employers and also ensure that the benefits realized as a result of working are equitably shared amongst all those who contribute to its achievement (DePillis, L. While more and more states are considering to increase their minimum wages, the franchising sector is requesting that the unique nature of its operations be considered due to the fact that they educate the public about potential economic growth and also work with the government to provide a conducive business environment for the workers. According to IBIS, profit margins in the quick-service industry are only in singles. It is difficult for these businesses to swallow external ‘shock’. It is important to identify the franchises that can absorb the 21% increase in wages for the employees because different franchises have different capacities depending on the cost of living in their localities.

The franchises may be compelled to increase the prices of their goods and services which will result to a decrease in sales volume. For instance, several franchises own stores in similar businesses as one business, they qualify under the Affordable Care Unit and 50-employee threshold that requires them to offer their employees with insurance cover. They also do not have access to their parent company’s resources to absorb economic shock. Franchise industry has flooded fast food and quick service industry hence they have low profit margins to even pay above the minimum wage. Impacts of Wages on Corporation Productivity A corporation may gain from increasing the wages of its employees. The workers are psychologically motivated to work to the best of their abilities and they confidently communicate about issues to the employers, the voices of the employees are rewarded via the wages.

The following economist model is commonly used to depict the relationship between wages and productivity; w/h=w/Y*Y/h w/h is the wages per hour of an individual worker w/Y is the wages of an individual divided by total revenue generated Y/h is the total revenue generated in one hour (productivity) The model shows that wages tend to match shared labour and is affected by productivity Coclusion Under the strategic solutions to the challenge of increasing wage in USA franchise industry, new models that will change their business structure after the US$15 minimum wage implementation need to be developed. They will have to incorporate technology in large scale to reduce the number of employees required for smooth running of the business.