Four Years Ago, This Chick-Fil-A Started Paying $17 An Hour. It Transformed the Business. Back in 2018, Eric Mason made headlines when he began paying his employees a "living wage." On this side of the great recession, his experience could be a roadmap for other fast food franchises.
This story appears in the June 2022 issue of Entrepreneur. Subscribe »
A little over four years ago, on a clear, sunny day in Sacramento, California, a TV news crew pulled up to a Chick-fil-A at the corner of a busy intersection. An American flag fluttered on a pole in the parking lot, and palm trees swayed above the Ford dealership across the street. The crew was there for a feel-good story.
"Imagine making $17 an hour working at a fast-food restaurant," a local ABC anchor said, introducing the segment. "And you'd get sick time, personal days, vacation days. Well, that is going to be the reality for one Chick-fil-A here in Sacramento."
The protagonist of this happy tale was Eric Mason, the operator of the Chick-fil-A in question. A former baseball player, Mason has a dense, athletic build, with a clean-shaven head and expressive brown eyes. "They're trying to survive," he said of his employees at the time. "When we go to the living wage, we're looking for people trying to raise families and improve their lifestyles."
Related: When You Adopt This Mindset, Everything Else Follows
In news clips from that day, Mason can be seen working the register in an Oxford button-down, bustling to tables with trays of chicken sandwiches and chatting up customers. "Enjoy!" he says, doling out fresh waffle fries to a party of teens. He is the picture of confidence, and competence.
But looking back on that moment, he admits, "I was scared. I was super scared. I didn't know if it was going to work entirely."
Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.
From where we're sitting now, the question of if — and how — Eric Mason's "living wage" experiment worked out may prove interesting to a lot of people, because a lot has changed in four years. At this stage in the "Great Resignation," a fast-food restaurant paying $17 an hour doesn't sound so crazy. An industry report by Black Box Intelligence and Snagajob cited a 144% turnover rate among hourly workers at limited-service restaurants in June 2021, with 70% more job vacancies than pre-pandemic levels. According to the Bureau of Labor Statistics, by that same month, the average nonsupervisory fast-food worker's wages had jumped 10% to hover around $13 an hour. Last spring, McDonald's announced they'll be raising wages to an average of $15 an hour in all company-owned stores by 2024 and encouraged franchisees to follow suit. So sure, $17 is still high, but not exactly hard to imagine.
"The natural market has pushed rates toward that level or higher in some instances," says Clint Smith, the founder and CEO of CareerPlug, a hiring software company in Austin that works with franchises. "You almost can't afford to pay a lot less right now because you just won't attract enough people, or the right people."
This is a story about compensation, yes — but really, it's a story about big-picture changes that more and more franchises are starting to consider. Paying a "living wage" may still seem out of reach to many franchisees, and it's true that the transition is not for the faint of heart: It involves more than extra dollars on a paycheck. Often, it requires a full business makeover. It may mean shifting to a smaller, mostly full-time staff. When done well, it also means offering benefits, and a demonstrable trajectory for career growth. But in return, business owners can create a more empowered, autonomous culture that allows them a semblance of work-life balance — all while steeply reducing turnover, which experts estimate costs restaurants between $2,000 and $6,000 per employee. When your turnover rate is 144%, that's simply untenable.
Related: Why Chick-fil-A Employees Never Say 'You're Welcome'
"People are looking at retention strategies more than I've ever seen before," Smith says. "In the past it's always been, how can we do more recruiting? But people have reached a point where they're like, "This is not sustainable. We just can't do the same thing anymore. We can't keep trying to replace employees, we've got to find a way to hang on to them.'"
And on that subject, Eric Mason has earned some bragging rights.
"Our retention is around 76%," he says, "which — compared to the rest of the industry — I'm super proud of. Those are less uniforms to buy, and less training, which is really expensive. The last 18 months have been a roller coaster ride, and I've experienced what everyone else has. Sometimes I say we've gotten donkey-kicked in the stomach week by week. But my crew just keeps showing up. So I haven't really gone through the huge [hiring] flux some of my peers have faced."
In other words, Mason's big gamble worked out pretty well.
"It was the best decision I ever made as a business owner," he says. "Just from a sales standpoint, when we switched over, we were right around the $5 million mark, and this year we'll hit over $11 million in sales. That's a lot of chicken."
Mason's leap into the living wage model came at a moment of personal crisis. He'd been given a moonshot opportunity — the chance to be a Chick-fil-A franchisee — but things hadn't played out as he'd hoped. "I was not in a good spot," he says. "Two, three years into my life at Chick-fil-A, I was struggling."
Mason had received the offer to open the Sacramento location on Madison Avenue in 2015. At the time, he was living in New Orleans and working as the director of a medical malpractice insurance company. Before that, he'd spent 17 years developing sales teams for a commercial insurance company — moving all over the country with his wife and their four kids. He didn't know anything about restaurants, but Chick-fil-A kept calling him back. Around 80,000 people apply to become Chick-fil-A operators every year, and just 100 are chosen — less than 0.5% — so the selection process is extremely competitive. It's worth noting that Chick-fil-A's franchise model is unusual, in that initial franchisee buy-in is just $10,000, since the parent brand maintains ownership over all real estate and equipment, and takes a hefty cut: 15% of gross sales, and 50% of net profits. This is why Chick-fil-A franchisees are called "owner/operators" instead of just "owners." Still, Chick-fil-A restaurants have brought in by far the most of any fast-food franchise in recent years (2020 data from QSR showed the brand averaged $5 million per location, compared to $2.9 million at McDonald's).
Related: Why Paying a Living Wage Is Smart Business
So when Mason got the call, he says, "I thought they had the wrong Eric Mason. I really did." He and his wife — his high school sweetheart — were both from Scotts Valley, California, and her dad had stage four melanoma. All signs were pointing west, toward home.
But Mason hadn't been fully prepared for how grueling the work of running a quick-service restaurant could be — especially one that serves 3,000 people a day. "It was one step forward, two steps backward," he says. "I was here Monday through Saturday till two in the morning, soaking wet. And I was just like, "I'm 45, 46. There's no way I can do this for another 30 years.' I was searching for the solution."
Mason's problem will be familiar to anyone who's worked at a fast-food restaurant; in fact, many probably assume it's an inherent part of doing business in that sector. With a constantly changing part-time staff, many of whom only work 10-20 hours a week, it's difficult to build anything lasting. "You set out a vision or a game plan — whether it's food safety, innovations in the drive-through, or just basic stuff like turning off the equipment and lights at the end of the night," Mason says. "Things weren't getting done because there were so many things going on in each person's life. And you know, that's just life. But [with a bigger staff and more turnover] there's more drama, complacency, irresponsibility."
Related: 5 Ways to Improve Employee Care During an Uncertain Time
In April 2018, Mason went down to Austin on a company "excellence trip," and there he met a Chick-fil-A operator named Jeff Glover, who had implemented a living wage model all the way back in 1999. "It hit me like a ton of bricks," Mason says. "That is going to work with my personality." He came home, met with his leadership team, and implemented the plan several weeks later. He knew it wouldn't be a cakewalk, but he was ready for the challenge.
"I realized that if I hired full-time employees, I didn't need 120 of them," Mason says. "I only needed 70, 75 full-timers. But what do you do with your existing 100-plus employees who aren't going to fit into the full-time model? So I grandfathered all those folks in, but I lost about 25% of my staff initially because they just couldn't do the hours that we needed them to do. That was the hardest period. But over time that worked itself out and, well, things changed."
So, Eric Mason got the idea from Jeff Glover. But where did Glover get the idea?
According to Glover, one fateful day in 1999, he was smacked with "sort of a divine question" that would come to define his career: If I paid a living wage, what would my life be like? "I'd never heard of anybody doing that in the fast-food industry," he says. But like Mason, nearly two decades later, Glover was desperate to get out of the day-to-day weeds. "I wanted to be thinking on a month-to-month, year-to-year basis. I wanted a higher altitude in my bandwidth."
At the time, a living wage was $9 an hour — a determination Glover made not by consulting "the Google machine" or other fast-food franchises, but by one-upping big box retailers like Sam's Club and Costco, and line worker wages in the local hardware industry. When he started offering $9 an hour, he was surprised to discover how quickly he transformed from a "neighborhood employer," competing with the McDonald's down the street, to a "regional employer." People were coming from all over to work for him, majorly deepening his pool of applicants. He called his new hires "industrial athletes."
Related: Why You're Hurting Your Bottom Line If You Only Care About the Bottom Line
"It's surprising how quickly we won the war on turnover," he says. "I know a lot of franchisees who are hiring 10, 15 people a month. Everything during the pandemic has an asterisk beside it, but pre-pandemic we might only hire three, four, maybe five people in a quarter. Our average employee tenure was over four years, which is incredible retention in this industry." At the time of our interview, Glover had seven employees who had been with him since the very beginning, for over 20 years (one has since passed away and two left due to life changes like a new baby). His original Austin location was among the highest-volume lunch hours of any Chick-fil-A in the country for a 10- year period, and in 2018 they had the highest customer count in the brand's 50-year history.
Glover says that for him, the toughest part of the transition was learning to lead an older, more ambitious staff. "For a couple years, I was still a fast-food amateur leader, leading the way I did when I had a fast-food amateur staff," he says. "And yet, I had breadwinners working for me. A single mom with two or three kids has different needs and motivations than a high school kid saving up for an Xbox. These folks need continued development and motivation to stay engaged. Our level of care needs to be deeper and more meaningful."
Related: 4 Ways Employers Should Show Their Employees They Care
Case in point: Glover made his own wave of headlines in 2015, when he shut down his restaurant for renovations, but continued to pay his staff throughout the five-month closure — and even gave them a $1-an-hour raise for staying with him. "It would be a real financial crisis for the 50 families represented by the workers here to have to go five months without a job," Glover told a local news channel.
"Since that time," Glover says now, "we've had over 400 visitors — Chick-fil-A staff members and operators, like Eric — who have come to hear about the "hospitality professional strategy.' In this industry, having a part-time staff is a paradigm. But we decided to do it differently, and ours is a body of work that proves the case."
Industrial athletes, hospitality professionals — whatever you call them, if you're implementing a living wage model, you need them. And the good news is, they come from all over: the hotel industry, Amazon, UPS, Uber, data processing centers, customer service companies. According to CareerPlug's VP of Sales Chris Igou, it's not important what industry you're recruiting from or where you're posting jobs; it's how you're attracting them. "These days, paying a livable wage is table stakes," Igou says. "The new employee making $17 an hour wants to feel like they matter, and their voice is heard. If you can put that out into the world, believe me, it's connected enough that the good people will find you and be very attracted to your job posts."
For Mason, this was where his past career began to truly align with his career at Chick-fil-A. "Being in corporate America for 20-plus years," he says, "I learned how to recruit, attract, elect, train, develop, retain, and promote people. I know that attraction piece is really important, so our culture starts from the first time someone submits an application."
At Mason's Chick-fil-A, the hiring process goes like this: Someone on Mason's HR team reaches out to a candidate and lays out the expectations of a given role, along with what an employee can expect in return (wages, medical insurance, PTO, sick days, a $1 match up to 3% on their SIMPLE IRA). From there, it's a five to six step process to be selected, over an average timespan of two to four weeks. Once they start, each employee trains for two weeks at 20 to 25 hours per week, which is "very expensive," Mason says, "but worth every single dollar." On Day 14, someone on the leadership team sits down with the new staffer for a check-in, to go through everything they've learned and get feedback on what they need help with. From there, the new employee starts full-time (32 hours a week or more) and has another check-in on Day 45. "We consider those first 45 days the most important of their careers at Chick-fil-A," Mason says. "And then every 60 days, every team member in our restaurant sits down with a director or me."
Another important thing new hires receive, Mason says, is a roadmap for advancement. The entry-level position is "hospitality professional," then "senior hospitality professional," "trainer," "team leader," "senior team leader," "manager" and "director."
Each promotion comes with a set pay raise on a scale from $18 to $30, and Mason thinks the set pay rates are important. "Before it was just me walking around going, "Hey, John, you're doing a really great job, I'm going to give you a 25-cent raise,' or "Sarah, gosh, your salads are amazing. I'm going to give you a 75-cent raise.' But I didn't like that because it was so inconsistent. Now the model is very
stable and everybody in the house knows what to expect."
Mason believes the roadmap for advancement — and the continued feedback from leadership — is the real glue that holds together a living wage model. "It's a key in their brain like, "Okay, I see the future of this work,'" he says. "I always say they come for the pay, but they stay for the culture."
In 2018, when Mason decided to make the wage transition, Lina Velez was a team leader at the Madison Avenue location. She admits she was "skeptical" of the plan at first. But since then, she's saved up enough to put herself through college and buy a car. In her five years at Mason's location, she was promoted five times, from trainer all the way to director and then Chief Human Resources Officer.
"During one of the worst pandemics in history," Mason says, "I've had five people buy new homes, people buying new cars. I've got moms putting their kids in private schools and paying for medicine that they might not have been able to afford before. I have about 22 people on medical insurance and 14 people on my SIMPLE IRA, which my benefits person says is unheard of for a quick-service restaurant."
Smith of CareerPlug says that benefits are a vital piece of the equation for anyone serious about retention. "I have a rule of thumb that a dollar in benefits could be worth up to two or three dollars in wages," he says. "If you get someone set up on a healthcare program or retirement savings, they're going to think twice about leaving just to make an extra dollar an hour."
Related: 5 Things You Need to Know Before Investing in a Chick-fil-A Franchise
And when it comes to the wages themselves, Smith says, he thinks it's only a matter of time before many quick-service restaurant franchisees who wrote off higher wages as untenable will start to rethink that assumption. "The biggest initial objection is, "I can't afford to do that. It's not going to work with my numbers,'" Smith says. "But I think that's where people have to go back and test a little more. They might ask, what if I could reduce my turnover by 25%? I think in a lot of cases, you can make it work. There might be people who aren't making enough, but that's where they should look at other things. Do I need to raise prices, or find some other way to generate revenue? Or can we get it done with fewer employees that are just really talented?"
For Mason, the biggest personal payoff in all of this has been a greater sense of "peace, balance, and health" that comes with knowing he can step away from the business. He's been mentoring other Chick-fil-A operators interested in the living wage model, and recently flew with his wife to attend the grand opening of a location in Ohio.
"One of the things I couldn't do three, four years ago was assign people things, empower them, and step back to watch it grow," Mason says. "Now I can leave for a week because I know my staff is capable and responsible. The decisions I made were hard, and they came with a lot of worry and exhaustion. But I'm very, very thankful I made them. I plan to do this until the day I die."
Related: 25 Interesting Facts You Should Know About Chick-fil-A
