• Sandwich franchise wants to expand in Seattle despite minimum wage

    By: Natasha Chen


    SEATTLE, Wash. - A sandwich franchise based in California wants to expand in the Seattle region despite the impending $15-an-hour minimum wage.

    Togo’s, based in San Jose, Calif., told KIRO 7 they have 18 franchise opportunities in the Seattle-Tacoma area that they hope to have running in the first half of 2015.

    This comes just a day after some franchise owners sued the city of Seattle over the plan to phase in the higher minimum wage.

    The plan defines a “big” business as having more than 500 employees, including franchises that may be part of a larger chain. Mayor Ed Murray’s plan requires big business to phase in the $15-an-hour rate much faster than small businesses or nonprofits.

    Renae Scott, the chief marketing officer of Togo’s, said, “No, that doesn't scare us at all.  We have a great product, we pride ourselves on our big, fresh and meaty sandwiches. We're moderately priced in the category, but we come from California. There's varying minimum wage requirements.”

     Togo’s already has several stores in San Francisco, a city whose mayor also proposed a plan this week to get to a $15-an-hour minimum wage.

     KIRO 7 asked the franchise owner of three local Subway restaurants, David Jones, to share his perspective of running a franchise in the sandwich business, knowing a higher wage is coming.

     Jones said he will have to raise prices by 75 cents per sandwich to recover costs of the higher wages alone.

     Across his three restaurants, he has 27 employees. But because Subway has far more than 500 employees altogether, Jones’ businesses would be considered a “big business.”

     Jones reacted to the Togo’s announcement by saying, “They might be right. We might all adjust, and we might be OK.”

     But he added, “If it were me, I would hold off on something like that and wait and see.”

     Jones also said the financial strain of meeting a higher minimum wage would fall mainly on the franchisee, and not the parent company, like Subway.

     He said Subway takes a flat rate off the top, while the franchisee would feel the difference if any profit margins change.

     Scott said Togo’s is a relatively smaller company with 250 stores only in the western part of the United States. She said Togo’s would have the ability to be more flexible with franchise fees to help people get started.

     In addition to adjusting prices in places where wages are higher, Scott said Togo’s would encourage franchisees to look at better efficiency in the labor model.

     While Togo’s is a member of the International Franchise Association that sued the city this week, Scott said Togo’s is not party to the lawsuit.

    Next Up: