Politics & Policy

Story of a Franchise Owner

Obamacare is harming fast-food workers; a minimum-wage hike would make it worse.

Mike DeRosa has been a restaurant owner for 30 years. He bought a single Burger King franchise in 1983 and now owns twelve across central and western Wisconsin with his partner, Gene Hatfield. As a successful restaurateur, he employs between 300 and 325 people, depending on the season. Many of them have worked with him for decades.

Having worked, at one time or another, every job in a fast-food restaurant, he knows what it’s like to be one of his employees, and he worries about how changes in government policies, such as the minimum wage and Obamacare, will affect not only his business, but his employees as well.

“We always see if there’s a way we can do more for our employees,” he tells me. “But if you’re running on the tight margins that restaurants do — we’re not talking about 10 or 15 percent, you’re looking at margins of 2 to 5 percent, but even 5 is pushing it — there’s only so much we can do.”

On December 5, small groups of fast-food workers in cities across the nation protested in favor of a $15 minimum wage and unionization. The protests came a month after President Obama announced his support for raising the federal minimum wage from $7.25 to $10.10, and five days before Rasmussen released a poll showing that 75 percent of Americans support raising the minimum wage to $10.10 or higher.

But while the media have focused on fast-food workers, particularly those living on the minimum wage, the forgotten story is that of the franchise owners, most of whom are locals who own only a few restaurants and would by no means be considered rich.

Having grown up as a normal middle-class kid, DeRosa came to own restaurants only after years of hard work in the industry, and after making a sizeable personal investment. He knows many of his employees personally.

“My first job was at 14, sweeping floors and cleaning bathrooms in an office,” DeRosa tells me. He worked through high school and college at an A&W and an Arby’s, as a busboy at a local restaurant, and eventually as a night manager at a Burger Chef.

When he graduated from college, he tried teaching for a few years before joining Burger King as a management trainee in 1974. “I spent ten years with Burger King working my way up. I got a job in corporate in training, then company district manager, then franchise district manager, so I really got to know all ends of the business,” he says. “I worked every position in the restaurant because I had to teach others to do it.”

In 1983 he left his job as a regional manager of franchise development, taking a pay cut of more than 60 percent to buy his first franchise with his father. “When I first bought the restaurant I was working 16-hour days, seven days a week, from December to mid-April,” he says. “Now that isn’t unusual. I don’t want anybody crying for me,” he added.

When I ask him how raising the minimum wage would influence his business, he tells me that every time the minimum wage has gone up, he has had to reduce his number of employees. The young — about 60 percent of DeRosa’s employees are aged 16 to 24 — will be most hurt by a minimum-wage hike. “I still try to make sure that I hire high-school kids and youngsters who can work outside of school at 15 and 16, and I still try to get them an opportunity,” he says. “But if the minimum wage were higher, would I be able to invest in a 14- or 15-year-old person? The answer would be no.”

Young people have many more limitations than the older workers. Due to regulations, workers under 18 can’t cut food, can’t use the fryer, and can work only a limited number of hours per week. Students in particular need shorter shifts and more time off. “They’re great kids and they do a good job when they’re there,” DeRosa says, “but they just can’t do enough to earn much higher wages, and that’s when you begin to shut off opportunities.”

When I ask DeRosa about a $15 minimum wage, he says, “Whenever I hear somebody say that, my first thought is to hand them the keys and tell them, ‘You go run it.’ If you start to raise the minimum wage that much, you’re going to have to cut your staff by a third and you probably won’t be hiring youngsters for any of this.”

The problems posed by the threatened minimum-wage increase are further compounded by Obamacare and the coming employer mandate. For DeRosa, 40 percent of his staff works 32 hours a week. Those workers will soon have their hours cut, because employers will be required to offer insurance to those who work over 30 hours a week. “If everyone took the insurance we offered, we would go broke. It’s more money than the company makes,” DeRosa tells me. “Like every outfit in the country, we have modified schedules, and there’s a lot of people that have lost those two to five hours a week to get under the 30-hour-a-week hurdle.”

Day in and day out, DeRosa works with employees to make his restaurants efficient and bring customers in the doors. To those who think restaurant owners are just fat cats feeding off their employees, DeRosa says: “They’re misinformed. I haven’t run across any operator that does anything to abuse their employees.” DeRosa does everything he can to keep employees satisfied. “Employees are what keeps customers coming back,” he says, “so you will do what’s necessary to the best of your ability to make sure that these people are comfortable and that they’re happy.”

DeRosa, like many restaurant operators, thinks of his restaurants as a family and tries to provide his employees with the best opportunities possible. “We help people,” he says. “One good example: My director of operations began working for me at 14 and has worked with me for 19 years. Now she effectively runs a dozen restaurants. When she got pregnant at 15, nobody kicked her out, everyone pulled together to help her.”

Her son began working for DeRosa two years ago, and he’s not the first child of an employee to ask him for a job. “When I have children of people who I hired in high school working for me, and pretty soon grandchildren of people who I’ve had working for me, that shows that there is very little abuse,” he says. “If not, they wouldn’t be here.”

— Alec Torres is a William F. Buckley Fellow at the National Review Institute.


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