By Canadian Press

Short-term solutions to minimum wage hike could hurt businesses: Freshii founder

Jan 24, 2018 | 2:45 PM

Health-food eatery Freshii implemented a number of solutions ahead of Ontario’s minimum wage hike that the company believes will continue to make it an attractive employer as the chain looks to expand rapidly over the next two years.

“There’s been some public statements around how other brands are handling and how other brands are suggesting franchise owners handle the minimum wage increase,” said founder and CEO Matthew Corrin.

“My view is that many of those suggestions feel short-term in nature. So, while immediate savings will be intact, I think the long-term impact on the culture potentially gets compromised.”

Corrin, who did not name specific companies, said that when making business decisions, he tries to imagine how an employee who received paid breaks and food discounts would feel if those were taken away.

“We really focus on how can we differentiate the value proposition of choosing to don the Freshii uniform versus putting on the McDonald’s uniform versus putting on the Tim Hortons uniform,” he said.

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Restaurant Brands International Inc. — the parent company of Tim Hortons — has faced criticism after some Tim Hortons franchise owners clawed back employee benefits to help absorb the Jan. 1 minimum wage bump to $14.

Corrin declined to comment on RBI’s public battle with its franchisees over how to offset the minimum wage, saying he didn’t know enough about what the company is doing.

At both RBI and Freshii, it’s up to individual franchisees to determine how much to pay their employees — so long as they follow labour laws— and what benefits they offer.

When the minimum wage hike was first announced, Corrin said Freshii held a call with its Canadian franchisees and changed a few things after gaining experience dealing with such bumps south of the border. Seattle, where Freshii operates, started to incrementally increase minimum wage in 2015, reaching $15 an hour for many employees on Jan. 1, 2017.

Corrin said that the company raised prices on some items in the fall and started to buy some ingredients pre-prepped rather than chopping them in store to allow employees to instead spend that time, for example, handing out samples to draw more customers in.

Freshii’s same-store sales are also helping to offset labour inflation, he added. Corrin anticipated the company would need that metric to grow around three to four per cent to outpace inflation, but Freshii has performed better than that.

The company released preliminary financial results Wednesday showing same-store sales grew 6.4 per cent in its fourth quarter and 5.5 per cent in its 2017 financial year. It will release full results for that time frame in late February.

Corrin said the company plans to open hundreds more locations this year and next, aiming for up to 760 stores by the end of its 2019 financial year, and creating hundreds of jobs in the process. It had 345 stores as of Sept. 24, 2017, according to financial documents, but added 25 net new stores in its most recent quarter.

Shares rose 53 cents or 7.53 per cent to $7.57 Wednesday after the company made the financial disclosures. In late September, the company’s stock plummeted about 35 per cent in a day when Freshii scaled back its expansion plans by some 100 locations.

Follow @AleksSagan on Twitter.

Companies in this story (TSX:FRII, TSX:QSR)

Aleksandra Sagan, The Canadian Press