from the OP story:
Indeed. These guys whine like the only thing they got out of franchising was a smaller checking account. Then why do it? Why not just open up your own local restaurant/shop?
You don't think they might be lying, do you?
Typically an increase in wages comes out of profits if a single business does it in a competitive market. If you believe in supply and demand setting prices this is pretty obvious, you have done nothing to effect either supply or demand. But even if you take the more reasonable approach that the business is setting their prices to maximize their profits it also stands to reason that increased wages come out of profits since you have already maximized your profits, increased wages have to cut prices.
But that is not what we are talking about here, a single business increasing wages. We are talking about all of the competitors having to increase wages. Once again, through the ramifications depending on your views of economics. If you believe that supply and demand set prices then we once again are faced with no change in either supply or demand leaving no changes in prices, but only in the short term. In the long term the increased wages mean that some marginal businesses will be forced out of business sooner than they would have been under the old wage structure. But the demand is still there for the product at the old price. And the more productive competitors who are left will be able to provide the supply to meet the demand because it will increase their prices.
One of the major flaws with neoclassical economics, the economics of the free market, is that they haven't caught up with the industrial revolution and the realities of it. Their principles are based on the economic principles of the 18th and early 19th century agrarian economies. In this case in the difference between capital investment and the use of capital services. Capital investment is limited, a single business only has a certain number of machines available to do their work just as agriculture only has a certain amount of land to use.
But unlike agriculture modern businesses can increase the use of the machines available to a much larger degree before they trigger diminishing returns. Any one business can increase their business, their sales volume, by using the machines available to them more frequently to increase their business. Neoclassical economics, especially the Econ 101 that most free markers rely on, hasn't caught up with this difference between the constrained availability of capital machines and the much less constraint of the use of the capital machines, what is called capital services. A manufacturing plant can add a shift and double their production with a reduced marginal cost of production.
Fast food can increase the number of people who are working in one location to increase the supply that a failure of a less productive fast food place provided. I had a reference to a McDonald's training video that empathized this point. I can probably find it again if there is interest in it.
Only if you don't accept the free market view of supply and demand setting prices could there be a long term problem. If you accept that prices are set to maximize profits and not by supply and demand then you have to accept that increasing wages in every business in a market will result in increased prices in the long term. And increased prices could result in reduced demand for fast food, in this case.
But this won't be the only change that happens. Increased wages will mean increased demand from the wage earners but lower profits economy wide. And as we have seen this is the biggest thing that we are lacking in the economy today, demand. We have huge amounts of capital sitting idle waiting for demand to pick up.
In other words this is what needs to be done, increase wages to increase demand, even if it means that profits must drop.
