Subway CEO 'Not Concerned' About a Federal Minimum Wage Increase

Subway is a major fast food chain with more than 41,000 restaurants in 106 countries. CNBC calls it the “largest restaurant chain in the world.” Despite its large size, the company isn't afraid of an increase in the federal minimum wage. Subway CEO Fred DeLuca recently said during an interview with CNBC that he is “not concerned” about the federal minimum wage increasing.

When he “started in the business, the minimum wage was $1.25,” and he has “seen an enormous number of wage increases,” DeLuca told CNBC. He added that increasing the federal minimum wage “won't have a negative impact hopefully, and that's what I tell my workers.” That is a bit of a change from 2013 when Deluca told CNBC that “doing a sharp raise all at once is a bad idea.” However, he added that “minimum-wage workers deserve to make more and a little bit of an increase makes sense to me.”

Recently, Subway has been embroiled in controversy concerning a food additive and a recent CNN report. The report found that individual Subway franchises have been found violating pay and hour rules in more than 1,100 investigations from 2000 to 2013. CNN looked at data from the Department of Labor’s Wage and Hour Division and found the investigations combined have “about 17,000 Fair Labor Standards Act violations and resulted in franchisees having to reimburse Subway workers more than $3.8 million over the years.” The report notes that Subway has over 26,000 locations throughout the U.S. and “each franchise owner is treated essentially as a small business.”

During the CNBC interview, DeLuca responded to CNN’s report. “First of all, the fact that we have so many stores has an impact on how many violations there are,” he said. “If we had 5,000 stores, there would be a smaller number than if we had 25,000 ... The vast majority of our owners are doing the right thing but some are not,” he added. Deluca also said that he thinks there are “a lot of first-time business people that enter into business in Subway, and they might not be as sophisticated in what to do.” He pointed out that Subway started partnering with the Department of Labor “maybe three or four years ago” to help educate its owners “on the right thing to do.”

Dairy Queen CEO chimes in, says people need a fair wage

Another CEO of a fast food company recently mentioned raising the federal minimum wage. The CEO of Dairy Queen, John Gainor, said in an interview with CNN earlier this month that, “People need to be paid a fair wage.” While he didn’t speak out in favor of raising the federal minimum wage to $10.10 an hour, he did say that low wages can encourage more turnover, and that is expensive for companies.

Some companies already pay more than the federal minimum wage of $7.25 an hour. Costco pays its employees $11 an hour, and last year CEO Craig Jelinek spoke out in favor of a bill that would raise the federal minimum wage to $11.50 an hour. While Gap, Inc. currently pays $9 an hour, it announced in February that it will increase the minimum hourly rate it pays its American employees to $10 an hour in 2015.

The majority of small business owners also favor raising the federal minimum wage, according to a survey conducted by Small Business Majority and published in March. The survey found that most small business owners support increasing the federal minimum wage to $10.10 an hour and adjusting it yearly to reflect the cost of living. The majority of small business owners surveyed (82 percent) do not pay any of their employees the current federal minimum wage of $7.25 an hour. Only 18 percent pay their employees the current federal minimum wage.

Photo: Dwight Burdette