MINIMUM-WAGE INCREASES AND EMPLOYMENT IN FRANCHISED FAST-FOOD RESTAURANTS

Card and Krueger's (1994) result that employment is unaffected by an i ncrease in the minimum wage in the franchised fast-food restaurant ind ustry appears to be inconsistent with conventional economic analysis. I take a closer look at the franchised fast-food industry and argue th at the presence of brand-name capital does not allow franchisees to su bstitute away from labor or decrease the level of services provided to customers - employment levels in franchised fast-food restaurants are closely tied to sales.