How might changes in minimum wage laws affect Benihana's labor costs?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
s decisions of our clients and third parties, in which we may have little or no influence in the overall operation of the applicable venue and such actions and decisions could have an adverse effect on our business and operations.
Labor and Supplies
Changes to wage, immigration and labor laws could increase our costs substantially.
Under the minimum wage laws in most domestic jurisdictions, we are permitted to pay certain hourly employees a wage that is less than the base minimum wage because these employees receive tips as a substantial part of their income. As of December 31, 2021, approximately 32% of our employees earn this lower minimum wage in their respective locations since tips constitute a substantial part of their income. If cities, states or the federal government change their laws to require all employees to be paid the general employee minimum base wage regardless of supplemental tip income, our labor costs would increase substantially. Certain states in which we operate restaurants also have adopted or are considering a
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, changes to wage laws could substantially increase costs for franchisees. Benihana is permitted to pay certain hourly employees a wage that is less than the base minimum wage because these employees receive tips as a substantial part of their income. As of December 31, 2021, approximately 32% of Benihana's employees earned this lower minimum wage because of tip income.
If cities, states, or the federal government change their laws to require all employees to be paid the general employee minimum base wage regardless of supplemental tip income, Benihana's labor costs would increase substantially. Certain states in which Benihana operates restaurants have adopted or are considering adopting minimum wage statutes that exceed the federal minimum wage.
Benihana may be unable or unwilling to increase prices to pass these increased labor costs on to customers, which could adversely affect the business and results of operations. Prospective franchisees should consider the potential impact of rising minimum wages on their profitability and discuss strategies for managing these costs with Benihana.