Fast Food CEO Learns a Powerful Lesson in How to Treat Minimum Wage Employees

January 4th 2017

Lucy Tiven

It turns out that raising the minimum wage can actually be good for business, as one fast food restaurant CEO recently admitted to a media outlet.

Wetzel's Pretzels store profits rose since California raised the minimum wage in 2014, Bill Phelps, chief executive of the fast food chain, told KQED Tuesday.


Phelps was initially worried that raising workers wages would result in lower sales. “Like most business people I was concerned about it,” he admitted.

Instead, the opposite effect took hold.

More people were visiting the pretzel chain and making larger purchases, Mike Jacobs, California Wetzel's franchise owner, told KQED.

“I was shocked,” Phelps said. “I was stunned by the business.”


“My overall sales were something like 15 percent ahead after the first minimum wage bump, and now they’re about 12 percent ahead this year,” Jacobs explained. “It isn’t because I’m such a great manager or smart guy, but the buying public has more money in their pocket.”

These comments arrive days after California raised the minimum wage to $10.50 an hour for companies with over 25 employees Jan 1.

The raise is part of a schedule (PDF) of incremental increases to raise the state's minimum wage to $15 an hour by 2022. Nineteen states and 21 local jurisdictions raised the minimum wage the first of the year, according to workers-rights group the National Employment Law Project.

Wetzel's isn't the only one cashing in on minimum wage increases.

Seattle's 2014 minimum wage increase didn't hurt the city's economy or result in outsized business closures, and noted job growth for high and low-wage workers, according to a 2016 report from the University of Washington (PDF). It emphasized that the economic growth was "largely because of the strong regional economy" and not due to a higher minimum wage, but dispels the myth that raising the minimum wage is bad for businesses.


Not all CEOs have profited off minimum wage hikes, and many business owners oppose raising the minimum wage.

Chipotle attributed recent dips in profits to raising the minimum wage, CNN Money reported in July. Opponents of raising the minimum wage argue that companies will have to charge more for goods – like Starbucks did in July — and won't be able to sustainably cut costs, the report added.


Some business owners and economists worry that minimum wage increases will result in companies relocating, as California small business owner Houman Salem argued in an op-ed on the Los Angeles Times.

Donald Trump's nominee for Secretary of Labor Andy Puzder has been an outspoken opponent of raising the minimum wage during his tenure serving as the CEO of CKE restaurants, the parent company of Hardee's and Carl's Jr.

Puzder, a somewhat prolific author of Wall Street Journal op-eds, has written that raising the minimum wage would result in less jobs, higher priced goods and increased automation — machines replacing human workers. Further, Puzder voiced enthusiasm about opening an employee-free restaurant in a March interview with Business Insider.

However, evidence doesn't suggest that raising the minimum wage actually costs jobs, liberal economist Paul Krugman argued in a piece for the New York Times,.

Check out the initial report on KQED.