Why do we ignore all the other costs of doing business?
Over the last two years there has been a push to raise the minimum wage as working class incomes continue to lag behind increases in the cost of living across the nation. Led by national organizations such as Fight For $15, the minimum wage has become a polarizing topic which has pitted the “working poor” against corporate interests.
The most vocal argument against raising the minimum wage is that it would increase the total operating expense of those businesses which pay their employees a wage at, or close to, the current national minimum wage of $7.25/hr.
But I have often wondered, why is there NEVER any mention of all of the other increasing costs that businesses are forced to pay?
As someone who has managed hundreds of businesses and franchises over the last two decades, I know that labor generally accounts for about 20% of the total operating cost of these businesses. And yet, it is the cost which most people assume is directly responsible for the price of goods and services purchased by consumers, as opposed to other costs which continue to increase every year such as insurance or rent.
In New York City, businesses leasing commercial space have seen rent increase 50% over the last five years. Nationally, commercial real estate rental costs have continued a steady climb of about 3% per year since 2009, while the minimum wage stayed flat for the last decade.
Most franchisee leases have a built-in rent increase schedule where the land owner (usually 
the parent company) is guaranteed a flat percentage increase every year of the lease (standard industry average is 3% per year or 10% every five years), regardless of what the “free market” dictates. During the “recession” from 2007 to 2009, as commercial real estate value plummeted as much as 50% in high value markets, those franchisees continued to pay increasing rent.
So the question that should be asked is how come there is no outrage over the INSANE prices landlords charge for rent? Why is it that people who struggle to make $18,000/yr are demonized while corporations who charge hundreds of thousands of dollars per year for a few thousand square feet of paved concrete get a free pass?
Why should McDonald’s get to increase its average franchise rent to $292,000 per unit (an increase of 26% in six years) without any public outcry, while a call to raise salaries 10% once a decade is met with the doom and gloom declaration that such an increase will cause businesses across america to shut their doors forever?
Perhaps people need to take a look at the other 80% of costs involved in owning a business and raise hell every time there is a proposed increase in THOSE costs. Perhaps if land owners and insurance companies were demonized with the same anger and indigantion usually reserved for the working poor, your precious Big Macs and Whoppers would be cheaper while the people making them could afford to buy more goods and services from other local businesses and help stimulate the economy.
Just some food for thought…
