A Franchise Guy in the White House

Andrew Puzder would bring experience, pro-business perspective to Labor Secretary’s office

By Joe Mathews, CEO of Franchise Performance Group
With Don Welsh, Principal, Franchise Performance Group

On Dec. 8, President-elect Donald Trump nominated as his Secretary of Labor Andy Puzder, CEO of CKE Restaurants Inc., the parent company of the Hardee’s and Carl’s Jr. burger chains who is credited with the turnaround of these chains.

If his nomination is confirmed, what could this mean?  

At the risk of rattling a few cages, having a manage-by-the-numbers CEO and small business advocate whispering in the President’s ear represents a welcome and radical departure from the hostile-to-the-entrepreneur, “You didn’t build that!” culture of the Obama administration.

In stark contrast to Puzder, Obama’s Secretary of Labor Thomas Perez doesn’t appear to have ever worked in the private sector, owned a business or had to manage labor costs to achieve a certain bottom line. Therefore, at best he is a small-business theorist. Current governmental policies such as escalating the minimum wage and mandating healthcare insurance without an understanding of impact on job creators would be reflective of his inability to connect policy to the bottom line.  

large stepping stones winding through a watery field
Secretary of Labor nominee Andy Puzder understands that minimum-wage jobs are meant to be stepping stones toward more lucrative, long-term employment.

Puzder, as CEO of a major food service organization, understands specifically how the labor component, minimum wage and mandated healthcare benefits and other policies impact the entrepreneur’s bottom line. To put this in greater perspective, “our guy” would have an intimate knowledge of the unit-level economics of food service, which a recent Wall Street Journal article claimed now represents 10% of the job market. Puzder understands what small businesses could afford to pay in labor and benefits and still have a viable business worthy of operating. In addition, he knows what the labor model looks like for a business worthy of capital investment and expansion, thus creating more jobs and growing the economy.

In a 2015 column for the Wall Street Journal, Puzder wrote about the significant negative impact a massive minimum wage hike could have on small businesses nationwide. “Instead of creating a living wage, the fight for dramatic minimum-wage increases could leave millions with no wage at all,” he wrote.

Puzder understands entry-level jobs are meant to be stepping-stone jobs for teenagers, minority groups, immigrants and those who don’t have the credentials for college. He has watched restaurant employees start on the french fry machine and eventually make it to assistant manager, manager, district manager and even franchisee. He gets that a $15-per-hour minimum wage would force automation that would ultimately kill jobs and crater businesses. He knows it’s not the government’s job to dictate to the entrepreneur what they have to pay in wages. He understands that artificially inflated high wages increase a small businessperson’s risk, reduce their reward, and offer disincentives to hiring and new growth. He knows these costs can’t always be passed along to the customer, meaning the business owner carries the burden of risk. Lastly, he knows at what point the risk is simply not worth it to the entrepreneur, shifting the entrepreneur’s mindset from “high growth” to “milking the dying cash cow.”

Overtime thresholds, mandated healthcare

With the Obama administration’s proposal to change the overtime pay threshold from $23,660 to $47,476 — currently under injunction by a federal judge — Puzder has pointed out that expanding the number of overtime-eligible employees by millions could have disastrous consequences.

“The move would hurt the very managers [Obama] intends to help by turning them into hourly employees, depriving them of the benefits that come from moving into management,” Puzder wrote in another piece for the Wall Street Journal. “Overtime pay has to come from somewhere, most likely from reduced hours, reduced salaries or reduced bonuses.”

As for Obamacare, Puzder has been a strong proponent of the law’s repeal. He contends the law is directly responsible for the slow-down in the restaurant business, essentially creating a “government-mandated restaurant recession” because disposable income was going toward premiums under the so-called Affordable Care Act rather than eating out.

He wrote a few years ago in a piece for the Wall Street Journal that “Obamacare has caused millions of full-time jobs to become part-time, imposed a tax on lower-income workers who cannot afford it, forced millions of people out of insurance they liked, restricted access to doctors for millions of others, and created an enormous bureaucracy that discourages our doctors and nurses while suppressing health-care system innovation.”  

A shift in perspective

Puzder’s appointment would finally mean a pro-business voice in an office that has been lacking in that perspective for a long time. Puzder’s background is in building an organization that helps small business owners achieve success, serve their communities and create lots of private-sector jobs. He’s been in the business trenches and has seen first-hand the effects of bureaucratic policies on business owners and their employees. That’s why he understands that a minimum-wage job is meant to be a starting point for joining the labor force, not a destination, and that it should be a vehicle to attain more skills, more responsibilities and therefore more personal economic empowerment. In other words, equating minimum wage into a living wage creates an economic trap where neither the individual nor the company has any incentive to improve.

More care needs to be spent addressing education as a way of creating a labor force that understands the role of economics and how they will operate in the labor force for the rest of their working lives. The injustice is not the wage rate, it’s failing to prepare the labor force for a 50-year working journey.

About Joe Mathews

Joe Mathews, CEO and Founder of Franchise Performance Group, is a thought leader in the area of franchisee recruitment, franchise lead generation and franchisor growth strategies. He has published dozens of articles on franchising and is author or co-author of four books on franchising: Street Smart Franchising, Franchise Sales Tipping Point, How to Create a Franchise Sales Breakthrough, Guaranteed and Developing Peak Performing Franchisees.

About Don Welsh

Don Welsh brings more than 25 years of experience as an executive across multiple industries including tech, finance, sports and restaurants. He works to align organizations, help clients develop their talent and create positive working environments, build long-term partnerships and foster a results-driven culture. He is managing member of Simple Tie Ventures, a private equity firm that helps companies achieve their potential, and is also a multi-unit franchisee with Sonic Drive-In.

About Franchise Performance Group (FPG)

FPG is a leading consulting firm specializing in helping franchisors create a breakthrough in franchisee recruitment results. We offer a full range of services, including:

  • Cutting-edge franchise buyer lead generation (franchise sales website design, brand storytelling content strategies)
  • Franchise sales process design
  • Franchise sales force assessment, training, ongoing coaching and skill development
  • Outsourced franchise sales
  • SBA financing
  • Strategic consulting to improve the value proposition of the business